As artificial intelligence (AI) continues to reshape industries, semiconductor stocks are at the forefront of this technological transformation. These companies design and manufacture the computer chips that power everything from smartphones to AI servers. Below, we take a closer look at the seven top-performing semiconductor stocks of 2024, based on one-year performance.

Revenue Performance

• Definition: Revenue performance refers to the ability of a company to generate sales or income over a specific period. It is typically measured as a percentage change in revenue over time (quarter-over-quarter or year-over-year), indicating how well the company is growing or maintaining its sales base.
• Significance: It reflects the overall demand for a company’s products or services and is a key indicator of business expansion or contraction.

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Price Performance

• Definition: Price performance refers to the change in a company’s stock price over a specific period, usually expressed as a percentage. It provides an insight into how the stock is performing in the market, reflecting investor sentiment, confidence, and market trends.
• Significance: Price performance helps investors evaluate how a company’s stock is faring relative to the market and other stocks. It can be a key metric for understanding market perception and growth potential.

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Earnings Growth

• Definition: Earnings growth refers to the rate at which a company’s net income (profit) increases or decreases over time, usually on a year-over-year basis. It is an important financial indicator that shows how well the company is converting revenue into profit.
• Significance: Higher earnings growth typically signals that the company is managing its costs efficiently and capitalizing on market opportunities. Investors often use earnings growth to gauge a company’s profitability and future prospects.

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TTM (Trailing Twelve Months)

• Definition: TTM stands for "Trailing Twelve Months" and refers to the data from the last 12 consecutive months used for reporting financial performance. It's a way of measuring the most recent full-year performance, regardless of where the company's fiscal year starts and ends.
• Significance: TTM is widely used because it provides an up-to-date reflection of a company’s performance. Unlike annual reports or quarterly reports, which focus on specific timeframes, TTM allows for a continuous view of revenue, earnings, and other key financial metrics, making it particularly useful for ongoing analysis.

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1. NVIDIA Corp (NVDA)

• Market Cap: $1.2T
• Current Price: $510.76
• Performance (1-Year): 142.31%
• Earnings Growth (TTM): 127.84%
• Revenue Growth (TTM): 101.62%

Overview: NVIDIA is the undisputed leader in the GPU market, and the growing demand for AI has propelled its stock price to new heights. The company's chips are essential for AI model training, data centers, and high-performance computing. With NVIDIA expanding into AI-specific infrastructure like its DGX supercomputers, it is set to continue leading the AI hardware space.

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‍2. Coherent Corp (COHR)

• Market Cap: $6.7B
• Current Price: $45.29
• Performance (1-Year): 113.85%
• Earnings Growth (TTM): 91.27%
• Revenue Growth (TTM): 58.93%

Overview: Coherent Corp specializes in photonics technology and lasers used in semiconductor manufacturing. The company's impressive growth is driven by its vital role in advanced semiconductor processes, particularly in the optics sector, which is critical for 5G and AI technologies.

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3. Broadcom Inc (AVGO)

• Market Cap: $305.12B
• Current Price: $895.22
• Performance (1-Year): 82.48%
• Earnings Growth (TTM): 68.92%
• Revenue Growth (TTM): 52.16%

Overview:Broadcom is a major player in semiconductors, with a strong presence in both wired and wireless communications. The company has benefited from rising demand for semiconductors in data centers, AI infrastructure, and consumer electronics. Its acquisition of companies like VMware has improved its standing in the market, helping Broadcom stay competitive in the rapidly evolving tech landscape.

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4. Monolithic Power Systems Inc (MPWR)

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• Market Cap: $30.12B
• Current Price: $620.83
• Performance (1-Year): 81.44%
• Earnings Growth (TTM): 73.54%
• Revenue Growth (TTM): 66.32%

Overview: Monolithic Power specializes in power solutions for various industries, including automotive, industrial, and data centers. Its growth is fueled by the increasing demand for energy-efficient power systems, particularly in electric vehicles (EVs) and AI servers.

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5. Taiwan Semiconductor Manufacturing Co. (TSM)

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• Market Cap: $504.86B
• Current Price: $108.34
• Performance (1-Year): 81.16%
• Earnings Growth (TTM): 45.67%
• Revenue Growth (TTM): 39.28%

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Overview: As the world’s largest semiconductor foundry, Taiwan Semiconductor controls over 50% of the global market. TSMC manufactures chips for major companies like Apple and NVIDIA, making it a critical player in the AI and tech ecosystem. These ongoing investments position the company for sustained growth in the years ahead.

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6. KLA Corp (KLAC)

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• Market Cap: $82.71B
• Current Price: $645.55
• Performance (1-Year): 64.45%
• Earnings Growth (TTM): 49.22%
• Revenue Growth (TTM): 42.15%

Overview: KLA provides process control and yield management solutions for semiconductor manufacturing. The company’s tools and software help chip manufacturers ensure high-quality production. As semiconductor fabrication becomes more complex, KLA’s services are increasingly in demand, driving its impressive stock performance.

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7. Qualcomm Inc (QCOM)

• Market Cap: $153.20B
• Current Price: $136.52
• Performance (1-Year): 54.76%
• Earnings Growth (TTM): 35.54%
• Revenue Growth (TTM): 29.62%

Overview: Qualcomm is a leader in mobile chip design and has a growing presence in automotive and AI applications. The company’s Snapdragon platform powers many of the world’s leading smartphones, and its push into AI-powered devices positions it for future growth, especially in autonomous vehicles and next-gen mobile tech.

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Key Drivers for Semiconductor Stocks:

1. Artificial Intelligence (AI)

AI is the major growth engine for semiconductor companies, particularly those like NVIDIA and Broadcom, whose chips are integral to AI model training, data centers, and machine learning applications.

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2. The Internet of Things (IoT)

IoT refers to the interconnected network of devices that communicate and share data. As IoT applications grow, particularly in smart homes and cities, the demand for efficient semiconductors will rise.

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3. Global Chip Demand

The demand for semiconductors spans industries beyond AI and IoT, including automotive, healthcare, and consumer electronics, further driving the growth of these companies.

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Pros and Cons of Investing in Semiconductor Stocks:

Pros:

• Market Dominance: Several segments, like semiconductor foundries and photolithography, are dominated by a handful of companies, reducing competition.
• AI Momentum: Companies developing AI-specific hardware, like GPUs, are seeing unprecedented demand as AI becomes more widespread.

Cons:

• Geopolitical Risks: Companies heavily reliant on Taiwan, such as TSMC, face risks related to geopolitical tensions.
• Regulatory Risks: Export restrictions on semiconductors, especially to China, could impact sales and lead to stock volatility.
• Cyclicality: Companies purchase chips in times of economic expansion. But when the economy contracts, chip stocks fall the fastest.

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Semiconductor stocks offer significant growth potential, particularly as AI and IoT become increasingly essential to modern technology. Companies like NVIDIA and Taiwan Semiconductor are well-positioned to capitalize on this trend. However, investors should be mindful of the risks associated with geopolitical and regulatory factors in this highly concentrated and essential industry. 

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If you invest in Semiconductor stocks, it’s important to monitor for material events to avoid missing news or announcements that can significantly affect your investments.

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Other Ways to Profit from Semiconductor Stocks

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• Reduced exposure to macroeconomic events
• Reduced exposure to competition
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