ON Semiconductor Corporation ON is Attracting Investor Attention: Here is What You Should Know November 20, 2024

While trillion-dollar Nvidia Corporation (NVDA) has been turning heads, Broadcom is no slouch as the #2 largest U.S.-based semiconductor company. SiMa.ai is hoping to displace Nvidia for generative AI at the edge with powerful and efficient chips that it says can handle a wide variety of modalities in one, “software-centric” platform. Lightmatter says it’s reinventing AI infrastructure with 3-D stacked photonics chips that can dramatically increase AI cluster bandwidth and performance while lowering energy use. Etched says it’s betting its whole business model on what it’s calling the world’s first specialized chip for transformer-based AI models.

But the semiconductor sector is growing rapidly as the world rapidly embraces artificial intelligence (AI) development and applications, for which semiconductors are critical for. Long-term debt is just $8.5 billion, which is less than a third of the $26 billion in cash and cash equivalents at the beginning of fiscal 2024. It’s also just 20% of shareholder equity of $43 billion, indicating Nvidia has plenty of dry power to access more capital. One noteworthy item on the income statement is the decrease in research and development, from 6.3% of sales in fiscal 2021 to 4.3% in fiscal 2023. By comparison, however, Taiwan Semiconductor spent 8% of revenue on R&D in 2023 and Nvidia spent more than 14% of revenue on R&D. From fiscal 2022, which ended June 30, 2022, SMCI’s gross margin was 15%, but 18% in fiscal 2023.

Next Up In Investing

The $7.12 billion and $7.48 billion estimates for the current and next fiscal years indicate changes of -13.7% and +5%, respectively. The consensus earnings estimate of $4 for the current fiscal year indicates a year-over-year change of -22.5%. Here at Zacks, we prioritize appraising the change in the projection of a company’s future earnings over anything else.

Why AMD Is A Top Pick

Hardware, such as PC and laptop chips, tends to become a commodity as the years progress and more advanced chips come out. If a new market is growing quickly, other chipmakers might pile on with similar products. Micron’s strategic approach to research and development, combined with its global manufacturing footprint, enables the company to maintain a competitive edge in the fast-paced semiconductor industry. Through collaborations with industry partners and a commitment to sustainability, Micron aims to address the growing demand for high-quality memory solutions while minimizing its environmental impact.

Zacks’ 7 Best

1. Of note for SMCI, is the statement of cash flows for the nine months ending March 31, 2024.
2. In the case of ON Semiconductor Corp. the consensus sales estimate of $1.76 billion for the current quarter points to a year-over-year change of -12.7%.
3. Last fiscal year became a turning point for the company, as revenue in the fourth quarter jumped 69% over the previous year, and while there was a loss of 3 cents per share, that was an upside surprise to the 11 cent loss that analysts expected.
4. ON Semiconductor Corp. (ON Quick QuoteON – Free Report) is one of the stocks most watched by Zacks.com visitors lately.

Plus, some established players in the semiconductor space provide dividends, adding an income component to the growth prospects. Despite the cyclical nature of the semiconductor industry, Micron has managed to navigate market fluctuations successfully, maintaining healthy profit margins and cash flow. This financial resilience is crucial for sustaining high levels of investment in research and development and is essential for staying competitive in the fast-evolving tech landscape.

Overall, WOLF ranks 14th on our list of the AI stocks that are making waves on Wall Street. While we acknowledge the potential of WOLF as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than WOLF but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock. It added that the chips deliver 10 times greater performance per watt than alternatives. Enfabrica says it’s delivering the fastest network interface controller chip for GPU servers in the industry with silicon that was built from the ground up for the needs of AI data centers. Analysts expect its revenue and earnings to grow another 32% and 41%, respectively, this year as it profits from surging demand for new chips.

First, despite the massive $31 billion commitment to property, plant and equipment for 2023, cash flow from operations was nearly $41 billion. Notable in the cash flow statement is an entry for nearly $2 billion in interest – or roughly 7% of its capex – flowing from the company’s a day in the life of a day trader cash horde of $48 billion. It’s hard to know how management sees the landscape, whether they are giddy or whether they are terrified. But the high utilization of cash indicates confidence in their fiscal 2024 forecast which calls for revenue of $50 billion and an EBITDA (earnings before interest, taxes, depreciation and amortization) margin of 60%.

Qualcomm

In addition to its massive scale, AVGO also offers a much more generous dividend than NVDA, with an above-average yield that even tops the 1.4% offered by the typical S&P 500corporation right now. Broadcom has successfully weathered recent disruptions in the marketplace, and it is currently projecting a mammoth 40% increase in revenue for fiscal 2024. Based on this operating model, there’s perhaps no company more tied to the broader industry, so it’s no surprise that revenue slumped slightly in 2023 but axi forex broker is on track for a 22% rebound in 2024. That proximity to big APAC technology firms has provided it with deep relationships as a key supplier for the region. Groq says its language processing unit enables blazing-fast AI inference performance through its cloud service and on-premises compute clusters. ON Semiconductor Corp. reported revenues of $1.76 billion in the last reported quarter, representing a year-over-year change of -19.2%.

TSML, ASML, NVIDIA, and Qualcomm are all solid starter stocks in this sector, and they should all continue to rise over the next decade amid soaring demand for more powerful chips. Those growth rates were stable, but analysts expect its revenue and earnings to surge 43% and 74%, respectively, this year as smartphone makers sell more 5G devices. It also expects the expansion of other markets, including auto telematics chips, to complement that growth. NVIDIA’s revenue and adjusted earnings rose 53% and 73%, respectively, last year as sales of its gaming and data center chips surged.

While perhaps not quite as much a household name as other semiconductor stocks on this list, the strong outperformance of Lam Research in 2023 is proof that this is a company worth paying attention to. Speaking of “fabless” chipmakers, Qualcomm predominantly relies on third parties to produce its best-in-class semiconductor products for How to buy avalanche token wireless communications. That includes a key design for smartphone leader Apple (AAPL), including chips that provide 5G connectivity for iPhones.