Semiconductors are the core infrastructure powering the Information Age. The way we live and work is also changing with AI, which is creating secular demand for more powerful chips. As a result, the industry has seen solid stock price performance over the last six months as its gain of 147% has outpaced the S&P 500’s 6.4% return.
Although these businesses have produced results lately, investors should tread carefully as not all companies are equipped for the next technological innovation. Taking that into account, here are two semiconductor stocks boasting durable advantages and one best left ignored.
One Semiconductor Stock to Sell:
Teradyne (TER)
Market Cap: $59.71 billion
Sporting most major chip manufacturers as its customers, Teradyne (NASDAQ: TER) is a US-based supplier of automated test equipment for semiconductors as well as other technologies and devices.
Why Is TER Not Exciting?
- Sales trends were unexciting over the last five years as its 3.4% annual growth was below the typical semiconductor company
- Estimated sales growth of 17.3% for the next 12 months implies demand will slow from its two-year trend
- Free cash flow margin shrank by 10.7 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive
At $383.50 per share, Teradyne trades at 51.1x forward P/E. Dive into our free research report to see why there are better opportunities than TER.
Two Semiconductor Stocks to Watch:
Applied Materials (AMAT)
Market Cap: $438.8 billion
Founded in 1967 as the first company to develop tools for other businesses in the semiconductor industry, Applied Materials (NASDAQ: AMAT) is the largest provider of semiconductor wafer fabrication equipment.
Why Could AMAT Be a Winner?
- Demand will likely accelerate over the next 12 months as its forecasted revenue growth of 32.8% is above its two-year trend
- Excellent operating margin of 29.1% highlights the efficiency of its business model
- Market-beating returns on capital illustrate that management has a knack for investing in profitable ventures
Applied Materials is trading at $558.75 per share, or 33.7x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Micron (MU)
Market Cap: $1.12 trillion
Founded in the basement of a Boise, Idaho dental office in 1978, Micron (NASDAQ: MU) is a leading provider of memory chips used in thousands of devices across mobile, data centers, industrial, consumer, and automotive markets.
Why Are We Bullish on MU?
- Market share has increased this cycle as its 78.2% annual revenue growth over the last two years was exceptional
- Healthy operating margin of 38.3% shows it’s a well-run company with efficient processes, and its profits increased over the last five years as it scaled
- Additional sales over the last five years increased its profitability as the 43% annual growth in its earnings per share outpaced its revenue
Micron’s stock price of $998.75 implies a valuation ratio of 9.2x forward P/E. Is now the time to initiate a position? Find out in our full research report, it’s free.
Stocks We Like Even More
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
