4 Stocks to Watch on Steady Growth in Semiconductor Sales

Global semiconductor sales continue to show robust growth, jumping 22.7% year-over-year in April, marking the 11th consecutive month of double-digit growth driven by demand for AI and data center chips. The Semiconductor Industry Association (SIA) reported April sales reached $57 billion, a 2.5% increase sequentially, with expectations of continued double-digit growth into 2025. Among companies poised to benefit, Advanced Energy Industries (AEIS) stands out with a projected earnings growth rate of 39.1% and a 10% rise in earnings estimates over the past 60 days.

Analysis

The semiconductor sector continues to exhibit robust expansion, with global chip sales in April reaching $57 billion, a 2.5% sequential increase and a significant 22.7% year-over-year surge. This marks the eleventh consecutive month of year-over-year sales growth exceeding 17%, underscoring sustained high demand, particularly from the Americas which saw a 45% YoY sales increase. This growth is primarily propelled by strong demand for chips in artificial intelligence applications, data centers, and a recovering memory chip market. The Semiconductor Industry Association (SIA) projects this momentum will persist, forecasting continued double-digit growth into 2025, following a 19.1% jump in global sales in 2024 to $627.6 billion. Specific companies highlighted demonstrate notable earnings potential: Advanced Energy Industries (AEIS) projects a 39.1% earnings growth for the current year with a 10% upward revision in consensus estimates over the past 60 days. ASML Holding (ASML) and Taiwan Semiconductor Manufacturing Company (TSM) both anticipate a 30.5% earnings growth rate for the current year, with ASML seeing a 7.1% improvement in earnings estimates and TSM a 0.4% improvement. Texas Instruments (TXN) expects a 6.7% earnings growth rate for the next year, with its current-year earnings estimates improving by 3.5%. All four companies currently hold a Zacks Rank #3 (Hold).

Key Decisions for Investors

• Investors should acknowledge the strong secular growth trend in the semiconductor industry, driven by AI and data center demand, evidenced by April's 22.7% YoY sales increase and an 11th month of over 17% YoY growth.
• Consider focusing on companies with significant upward earnings estimate revisions and strong projected growth, such as Advanced Energy Industries (AEIS) with a 39.1% projected earnings growth and a 10% estimate increase, and ASML Holding (ASML) with 30.5% projected earnings growth and a 7.1% estimate increase.
• While sector fundamentals and specific company growth outlooks for TSM, TXN, ASML, and AEIS are positive, the current Zacks Rank #3 (Hold) for these stocks warrants careful consideration, suggesting investors might monitor for opportune entry points or further positive catalysts before initiating or adding to positions.