The semiconductor industry is experiencing an impressive resurgence in 2024, with global sales projected to hit $617 billion, marking a 16.6% increase over last year. After an uneven 2023, this robust recovery, highlighted by April’s $46.4 billion in global sales—a 15.8% rise year-over-year—signals a strengthening market. Key drivers include soaring demand for artificial intelligence (AI) applications and expanding automotive and data center sectors. As inventories stabilize and demand surges, investors may find significant opportunities in overlooked semiconductor stocks poised for substantial upside.
While big names like Nvidia (NVDA) dominate headlines, Silicon Motion Technology (SIMO), SMART Global Holdings (SGH), and Tower Semiconductor (TSEM) stand out as under-the-radar stocks offering notable growth potential. Wall Street sees upside targets ranging from 17% to 51%, making these lesser-known players worth a closer look for traders seeking exposure to the semiconductor boom.
Silicon Motion Technology Corporation (SIMO)
Silicon Motion Technology Corporation (SIMO) leads in NAND flash controllers for solid-state storage devices. Specializing in SSD controllers, eMMCs, and other flash memory products, the company serves a diverse array of industries, from mobile devices to data centers.
Despite a 25% pullback from its June highs, SIMO shares remain up 17.3% over the past year. This dip presents a potentially attractive entry point for investors, especially given the company’s reasonable valuation. With a market cap of $2.15 billion and a forward price-to-earnings (P/E) ratio of 18.37, the stock trades at a discount to the broader tech sector. Moreover, the 3.13% annual dividend yield adds to its appeal for income-focused investors.
The company’s strong Q2 2024 results reflect its healthy position in the market, with net sales rising to $210.7 million and net income climbing to $30.8 million, or $0.91 per diluted share. Management forecasts revenue between $800 million and $830 million for the year, projecting growth of 25% to 30% year-over-year. Driving this optimism are new product launches like the SM2508, a power-efficient SSD controller targeting AI PCs and gaming consoles, and the SM2322, designed for high-performance portable SSDs. These innovations position SIMO for growth as AI and high-performance computing continue to expand.
Wall Street remains bullish on SIMO, with seven out of nine analysts rating the stock as a “strong buy” and the remaining two recommending a “moderate buy.” With a mean target price of $88.33, the stock offers a potential upside of 38.3%.
SMART Global Holdings, Inc. (SGH)
SMART Global Holdings, Inc. (SGH) has carved out a niche as a leader in specialty memory, storage, and hybrid solutions, with over 30 years of industry experience. While SGH shares have experienced volatility, down 8.7% over the past 52 weeks, the stock has gained roughly 12% in 2024.
With a market cap of $1.11 billion, SGH is included in the S&P SmallCap 600 Index and the Russell 2000 Index, making it a notable small-cap semiconductor play. Trading at 16.46x forward earnings and 0.94x sales, the stock remains attractively priced relative to its peers.
SGH’s Q3 2024 results demonstrated solid momentum, with net sales of $300.6 million, a 5.5% increase over the prior quarter. Gross margins improved, and non-GAAP earnings per share (EPS) surged by 37% quarter-over-quarter to $0.37, beating estimates. Looking ahead, the company forecasts net sales of $325 million and a gross margin of 29.5% for the fourth quarter, indicating sustained growth.
Recent initiatives include the launch of DDR5 Registered DIMMs with conformal coating, targeting liquid immersion servers in data centers. Additionally, a $200 million preferred equity investment from SK Telecom will further enhance SGH’s capabilities, particularly in AI-driven solutions.
Analysts are optimistic about SGH, with three out of four rating it a “strong buy” and one recommending a “moderate buy.” With a mean target price of $32.25, the stock presents a potential upside of 51.8%.
Tower Semiconductor Ltd. (TSEM)
Tower Semiconductor Ltd. (TSEM) is a leading specialty foundry known for its advanced analog semiconductor solutions across diverse industries, including automotive, industrial, and medical applications. The stock has posted impressive gains, up more than 30% year-to-date and 29.9% over the past year.
With a market cap of $4.37 billion and a forward P/E ratio of 19.31, TSEM remains relatively undervalued compared to the broader tech sector. The company’s Q2 2024 performance reinforced its growth trajectory, with revenue climbing to $351 million and operating profit reaching $55 million. Adjusted earnings per share came in at $0.53, reflecting solid profitability.
Looking ahead, TSEM expects Q3 2024 revenue of $370 million, signaling continued growth. A key development is the company’s strategic partnership with Tianyi Micro to develop next-generation OLED micro-displays for the AR/VR market. This collaboration positions TSEM to capitalize on the burgeoning demand for advanced AR/VR solutions, particularly in China.
All three analysts covering TSEM rate it as a “strong buy,” with a mean target price of $46.75, implying a potential upside of 17.4%.
Key Takeaways for Investors
For investors eyeing opportunities in the semiconductor sector, Silicon Motion (SIMO), SMART Global Holdings (SGH), and Tower Semiconductor (TSEM) offer compelling potential. Despite being lesser-known than industry giants like Nvidia, these stocks are well-positioned to benefit from sector-wide tailwinds driven by AI, automotive, and data center expansions. With substantial upside forecasted—ranging from 17% to 51%—these companies may offer attractive returns for those looking to diversify their semiconductor exposure.