Nanotech stocks are among the hottest plays in the market right now, thanks to analysts predicting astronomical growth for the market. For example, Fortune Business Insights forecasted the market would grow to $91.18 billion in 2024 and reach $332.73 billion by 2032.
The CHIPS Act and other legislative moves by the U.S. are further bolstering the appeal of investing in nanotech stocks, committing $52.7 billion in semiconductors, including $39 billion in manufacturing incentives and $13.2 billion in R&D and workforce development.
The National Nanotechnology Initiative (NNI) is perhaps the biggest undertaking regarding the tech concept on U.S. shores, with 30 federal agencies participating in the initiative, underscoring the importance of nanotechnology, which bodes well for stocks in the space as well.
To achieve national objectives, the highest-ever NNI budget request is $2.16 billion in 2024 for basic and application-driven R&D. Because of the trade war with China, the number is likely to go up; China has the most nanotech startup companies in the world.
Considering the strategic importance of nanotech stocks, the market size on offer and the U.S. government taking this area very seriously, it’s no surprise investors are encircling this area.
But the methodology to select nanotech stocks needs to be simple: Do not go for stocks rated laggards by analysts, and don’t invest in stocks without any upside left. Having a streak of earnings beats also helps.
Applied Materials (AMAT)
Applied Materials (NASDAQ:AMAT) is unique among nanotech firms because selective tungsten coating densifies and improves transistor performance. AMAT has risen 44% year-to-date, and analysts estimate an average price goal of $240.91, or over 5% upside, which is fantastic for nanotech companies.
Nanotech stocks are riskier due to the technology, so choose a proven performer like AMAT, which has met Wall Street estimates 9 times in 12 quarters.
In Q2 2024, AMAT reported net sales of $6.65 billion, up from $6.63 billion, and net income of $1.72 billion, resulting in diluted EPS of $2.06, up from $1.86.
But AMAT predicts sales of $6.25 billion to $7.05 billion and EPS of $1.83 to $2.19 in the third quarter of fiscal 2024. This prediction disappointed experts, causing market caution.
The leading nanotech stock AMAT works on several nanotech initiatives outside of financials. UVision SP brightfield inspection equipment from Applied Materials solved Albany NanoTech’s immersion lithography defect inspection problems. Plus, modern laser polarization technology boosted semiconductor production by finding 30nm defects.
Additionally, SEMVision G4 improved 2nm defect evaluation. SEM column technology and a multi-perspective SEM imaging system make this system the standard for sophisticated semiconductor examination.
Taiwan Semiconductor Manufacturing (TSM)
Taiwan Semiconductor Manufacturing (NYSE:TSM) gets plenty of analyst love among nanotech stocks because of consistent performance, holding a Strong Buy rating with a $178.13 price target, a potential upside of over 6%.
In Q1 2024, TSMC earned $1.38 per share, above the estimate of $1.31. Sales were $18.87 billion, above the projected $18.41 billion, demonstrating the company’s resilience and efficiency notwithstanding global economic issues.
TSMC, Apple’s (NASDAQ:AAPL) only supplier of iPhone and iPad A-series semiconductors, generates a lot of money from major IT companies. AMD (NASDAQ:AMD) and Nvidia (NASDAQ:NVDA), gaming and data center titans, also use TSMC high-performance chips.
The company is upgrading vehicle chip products using 3nm technology to make automobiles more powerful and minimize energy use; it’s also studying MRAM and RRAM to enhance car microcontrollers.
TSMC leads emerging semiconductor technology for 2-nanometer devices, making it the best company compared to Intel (NASDAQ:INTC) and Samsung.
The company will invest $17.36 billion to prepare for long-term size and technological expansion. Under its development ambitions, TSMC aims to construct a $12 billion Arizona chip facility. This factory will make 5-nanometer circuits for next-generation technologies. Once the project is finalized in 2024, TSMC can better fulfill global demand.
Both TSMC and NXP (NASDAQ:NXPI) are developing a $7.8 billion computer wafer facility in Singapore. This joint firm will be owned by TSMC-affiliate Vanguard. TSMC will find local manufacturing simpler.
Thermo Fisher Scientific (TMO)
Thermo Fisher Scientific (NYSE:TMO) has the most potential for growth out of the three nanotech stocks we looked at. Based on an average price target of $630.21, analysts think shares will grow over 11%.
The company showed a number of new nanotechnology and related technologies at the ASMS 2024 meeting. The new Stellar mass spectrometer from TMO makes clinical study and precise medicine better.
Thermo Fisher also released new versions of its Orbitrap Ascend Tribrid Mass Spectrometer, which can be used for biopharma, structural biology and multiomics. Also, the company’s Vanquish Neo UHPLC device makes mass spectrometers better at collecting data and moving samples through them.
TMO has beaten Wall Street predictions in three of the last four quarters, most recently by about 20%, beating an EPS estimate of $4.7. And the growth story shows no signs of slowing down. Analysts expect its EPS to rise by around 12% in fiscal 2025.
On the date of publication, Faizan Farooque did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.