Lingering global supply chain issues have been marring the chip industry’s growth. Moreover, the industry has been witnessing slowing demand from the end markets due to dampened consumer spending amid macroeconomic headwinds.

Declining investors’ interest in the sector is evident from the SPDR S&P Semiconductor ETF’s (XSD) 12.6% decline over the past month. Also, the Philadelphia semiconductor index slumped almost 10% in August.

However, the $280 billion CHIPS and Science Act is expected to boost the domestic semiconductor industry. Moreover, the worldwide semiconductor market is estimated to increase by 13.9% in 2022 and by 4.6% in 2023, thanks to continued digitization and automation.

Therefore, investors could consider buying fundamentally sound chip stocks Taiwan Semiconductor Manufacturing Company Limited (TSM), Applied Materials, Inc. (AMAT), MaxLinear, Inc. (MXL), Axcelis Technologies, Inc. (ACLS), and Photronics, Inc. (PLAB), which are currently trading under $100.

Taiwan Semiconductor Manufacturing Company Limited (TSM)

Headquartered in Hsinchu City, Taiwan, TSM manufactures, packages, tests, and sells integrated circuits and other semiconductor devices in Taiwan, China, Europe, the Middle East, Africa, Japan, the United States, and internationally.

On June 16, 2022, TSM launched its advanced logic, specialty, and 3D IC technologies at the company’s 2022 North America Technology Symposium. TSM also launched the next-generation leading-edge N2 process powered by nanosheet transistors and the unique FinFlex™ technology for the N3 and N3E processes.

Dr. C.C. Wei, TSM’s CEO, said, “The innovations we will showcase at our Technology Symposiums demonstrate TSMC’s technology leadership and our commitment to support our customers through this exciting period of transformation and growth.”

TSM’s net revenues came in at $18.16 billion for the second quarter ended June 30, 2022, up 43.5% year-over-year. Its net income came in at $8.10 billion, up 76.4% year-over-year. Also, its EPS came in at $0.31, up 76.4% year-over-year.

Analysts expect TSM’s revenue to increase 30% year-over-year to $73.88 billion in 2022. Its EPS is expected to increase 53.9% year-over-year to $6.34 in 2022. It surpassed EPS estimates in all four trailing quarters. TSM’s stock has gained marginally intraday to close the last trading session at $79.66.

TSM’s strong fundamentals are reflected in its POWR Ratings. The stock’s overall B rating is a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

TSM has an A grade in Quality and a B in Growth and Sentiment. Within the B-rated Semiconductor & Wireless Chip industry, it is ranked #13 out of 94 stocks. Click here for the additional POWR Ratings for Momentum, Stability, and Value for TSM.

Applied Materials, Inc. (AMAT)

AMAT provides manufacturing equipment, services, and software to the semiconductor, display, and related industries. It operates through three segments: Semiconductor Systems; Applied Global Services; and Display and Adjacent Markets.

On June 16, 2022, AMAT acquired Picosun Oy, a privately held semiconductor equipment firm situated in Espoo, Finland. This acquisition aims to enhance AMAT’s technology portfolio and expand the company’s consumer base.

AMAT’s net sales came in at $6.52 billion for the third quarter ended July 31, 2022, up 5.2% year-over-year. Its gross profit came in at $3.01 billion, up marginally year-over-year. Also, its total assets came in at $26.16 billion for the period ended July 31, 2022, compared to $25.83 billion for the period ended October 31, 2021.

Street expects AMAT’s revenue to increase 11.4% year-over-year to $25.70 billion in 2022. Its EPS to increase 12.6% year-over-year to $7.70 in 2022. AMAT’s stock has gained marginally intraday to close the last trading session at $90.64.

AMAT’s overall B rating equates to a Buy in our POWR Ratings system. It has a B grade for Sentiment and Quality. It is ranked #34 in the same industry. Beyond what is stated above, we’ve also rated AMAT for Stability, Value, Momentum, and Growth. Get all the AMAT ratings here.

MaxLinear, Inc. (MXL)

MXL provides radiofrequency, high-performance analog, and mixed-signal communications systems-on-chip solutions for the connected home, wired and wireless infrastructure, and industrial and multi-market applications worldwide.

On August 10, 2022, MXL and DustPhotonics, a leading developer of silicon photonics technology and solutions, announced their partnership to launch a silicon photonics chipset with integrated lasers directly driven from a DSP. This new product is expected to boost MXL’s product portfolio. 

MXL’s net revenue came in at $280.01 million for the second quarter ended June 30, 2022, up 36.3% year-over-year. Its net income came in at $31.97 million, up 4,261% year-over-year. In addition, its EPS came in at $0.40, up 3900% year-over-year. 

MXL’s revenue is expected to increase 24.9% year-over-year to $1.11 billion in the current year. Its EPS is estimated to increase 55.4% year over year to $4.18 in 2022. Also, it surpassed EPS estimates in each of the trailing four quarters. MXL’s stock has lost marginally intraday to close the last trading session at $34.85.

MXL has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Growth and a B grade for Quality and Value. It is ranked #6 in the same industry. We’ve also rated MXL for Momentum, Sentiment, and Stability. Get all the MXL ratings here.

Axcelis Technologies, Inc. (ACLS)

ACLS designs, manufactures, and services ion implantation and other processing equipment used in the fabrication of semiconductor chips in the United States, Europe, and Asia. For a variety of application requirements, the company provides high energy, high current, and medium current implanters.

On August 3, 2022, President and CEO Mary Puma said, “Axcelis delivered outstanding second quarter financial performance well above our guidance due to robust demand and our strong execution.”  

ACLS’ total revenues came in at $221.18 million for the second quarter ended June 30, 2022, up 50.2% year-over-year. Its net income came in at $44.19 million, up 133.7% year-over-year. In addition, its EPS came in at $1.32, up 140% year-over-year. 

ACLS’ revenue is expected to increase by 32.4% year-over-year to $876.77 million in 2022. Its EPS is estimated to increase 63.5% year over year to $4.71 in 2022. Also, it surpassed EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 28.3% to close the last trading session at $63.15.

ACLS’s overall B rating equates to a Buy in our POWR Ratings system. It has a B grade for Value, Sentiment, and Quality. It is ranked #15 in the same industry. We have also rated ACLS for Stability, Growth, and Momentum. Get all the ACLS ratings here.

Photronics, Inc. (PLAB)

PLAB and its subsidiaries produce and sell photomask goods and services in the US, Taiwan, Korea, Europe, China, and other countries. It sells its products to semiconductor and FPD manufacturers, designers, foundries, and other high-performance electronics manufacturers.

On August 30, 2022, Frank Lee, CEO, said, “Customers continue to place their trust in Photronics to support their technology roadmap by supplying the high-quality photomasks required for innovative designs that meet consumer demand.”

He added, “We are expanding capacity and growing volumes while controlling costs and capitalizing on operating leverage to deliver higher margins.”

PLAB’s total revenues came in at $219.95 million for the third quarter ended July 31, 2022, up 28.9% year-over-year. Its net income came in at $31.23 million, up 82.9% year-over-year. In addition, its EPS came in at $0.51, up 82.1% year-over-year.

Analysts expect PLAB’s revenue to increase 24.2% year-over-year to $824.53 million in 2022. Its EPS is expected to grow 115.1% year-over-year to $1.85 in 2022. It surpassed EPS estimates in all four trailing quarters. Over the past year, the stock has gained 12.4% to close the last trading session at $15.69.

PLAB has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Value and a B for Quality and Growth. It is ranked #9 in the same industry. Get the PLAB ratings for Stability, Sentiment, and Momentum here.

TSM shares fell $0.20 (-0.26%) in after-hours trading Thursday. Year-to-date, TSM has declined -34.67%, versus a -17.25% rise in the benchmark S&P 500 index during the same period.

About the Author: Riddhima Chakraborty

Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...

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