Best large-cap semiconductor stocks to invest in Q3 2024

The semiconductor industry continues to be a driving force behind technological advancement, powering innovations across multiple sectors. Large-cap semiconductor companies play a crucial role in this ecosystem, providing the tools, designs, and manufacturing capabilities that enable the creation of increasingly sophisticated electronic devices and systems.

KLA Corporation leads in process control and yield management systems, essential for maintaining quality and efficiency in semiconductor manufacturing. Monolithic Power Systems specializes in high-performance power solutions, catering to a wide range of applications from automotive to cloud computing. Applied Materials is a key player in materials engineering, providing equipment, services, and software for the production of advanced chips. Cadence Design Systems excels in electronic design automation, offering software, hardware, and IP for designing and verifying advanced semiconductors.

These industry giants are not just keeping pace with semiconductor advancements – they're actively shaping the future of chip technology. Dive into our in-depth analysis and expert insights on the best large-cap semiconductor stocks to watch in Q3 2024!

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Before we dive into each company, let`s take a look at how your investment would have performed if you had invested in top 10 stocks mentioned in this article 5 years ago.

Now, let`s take a closer look at each of the companies:

  • Onto Innovation (ONTO)

    Onto Innovation is a leading provider of process control metrology, defect inspection, lithography, and data analysis systems used by the semiconductor industry. Their solutions are critical for ensuring the quality and efficiency of semiconductor manufacturing processes.

    Onto Innovation financial statements

    Analysts recommendation: -1.4

    Financial Health

    • Return on assets (ROA): 8.68%
    • Return on equity (ROE): 9.52%
    • Return on investment (ROI): 9%

    Profitability

    • Gross margin: 19.06%
    • Operating margin: 18.5%
    • Net profit margin: 208.3%

    Growth

    • EPS (past 5 years): 7.12%
    • EPS (current): 3.35
    • EPS estimate (next quarter): 1.32
    • EPS growth (this year): 39.95%
    • EPS growth (next year): 29.53%
    • EPS growth (next 5 years): 30%
    • EPS growth (quarter-over-quarter): 102.8%
    • Sales growth (past 5 years): 28.8%
    • Sales growth (quarter-over-quarter): 27.1%

    💡 Why invest in Onto Innovation?

    Onto Innovation offers several potential advantages for investors seeking exposure to the semiconductor industry:

    • Essential Technology: The company's products are crucial for the semiconductor manufacturing process, making them indispensable for chipmakers.
    • Growth Potential: The semiconductor industry continues to grow, driven by increasing demand for electronic devices, which benefits companies like Onto Innovation.
    • Technological Leadership: Onto Innovation invests heavily in research and development to maintain its technological edge.
    • Recurring Revenue: The company generates recurring revenue through software and service contracts, providing a stable revenue stream.

    🐌 Key considerations before investing in Onto Innovation

    However, before investing in Onto Innovation, it's crucial to consider these potential challenges:

    • Cyclicality: The semiconductor industry is cyclical, and downturns can impact demand for the company's products.
    • Competition: The semiconductor equipment market is highly competitive, with established players and new entrants vying for market share.
    • Technological Change: Rapid advancements in semiconductor technology can require significant investments to stay competitive.
    • Global Economic Conditions: Global economic factors, such as trade disputes and geopolitical tensions, can impact the semiconductor industry and Onto Innovation's business.

    Final thoughts on Onto Innovation

    Onto Innovation's role in the critical semiconductor manufacturing process, its focus on technology, and the growth potential of the semiconductor industry make it an attractive investment. However, the cyclical nature of the industry, competition, technological challenges, and global economic factors necessitate careful consideration. Thorough research on Onto Innovation's product pipeline, financial performance, and the overall semiconductor industry trends is crucial before investing.

  • Cadence Design Systems (CDNS)

    In the silicon symphony where transistors hum and code conducts, Cadence Design Systems reigns supreme. This electronic design automation (EDA) titan isn't just crafting chip blueprints; it's orchestrating a masterful performance, harmonizing software tools with hardware expertise to empower the next generation of electronic marvels. But can this silicon maestro translate its technological baton into rewarding returns for your portfolio? Let's explore the hidden currents propelling Cadence's rise, alongside the potential discordant notes to consider before joining this technological odyssey.

    Cadence Design Systems financial statements

    Analysts recommendation: 1.71

    Financial Health

    • Return on assets (ROA): 17.05%
    • Return on equity (ROE): 29.44%
    • Return on investment (ROI): 20.06%

    Profitability

    • Gross margin: 87.99%
    • Operating margin: 28.59%
    • Net profit margin: 25.36%

    Growth

    • EPS (past 5 years): 25.42%
    • EPS (current): 3.87
    • EPS estimate (next quarter): 1.44
    • EPS growth (this year): 14.08%
    • EPS growth (next year): 17.62%
    • EPS growth (next 5 years): 17.55%
    • EPS growth (quarter-over-quarter): 3.59%
    • Sales growth (past 5 years): 13.9%
    • Sales growth (quarter-over-quarter): 8.61%

    💡 Why invest in Cadence Design Systems?

    Cadence's robust profile makes it a tempting pick for investors seeking exposure to the ever-evolving semiconductor and software sectors. Here's what fuels its formidable technological toolbox:

    • Chip Whisperer: Cadence boasts a legendary pedigree in EDA, providing tools and services for designing, verifying, and manufacturing cutting-edge chips. This leadership in silicon orchestration translates to consistent contracts and predictable revenue streams, laying a solid foundation for future growth.
    • Beyond the Nanometer: Recognizing the blurring lines between chip and software, Cadence diversifies its offerings, developing solutions for secure software quality and testing, artificial intelligence chip design, and cloud-based design tools. This strategic expansion mitigates risk and unlocks diverse avenues for growth beyond traditional EDA.
    • Innovation Alchemist: From futuristic 3D chip architecture to AI-powered design automation, Cadence invests heavily in R&D, striving to stay ahead of the curve with solutions that redefine chip design and software integration. This commitment to innovation ensures its offerings remain relevant and future-proofs its operations.
    • Global Chipmaker's Chorus: With operations spanning continents, Cadence caters to diverse design needs and unlocks international growth potential. This global reach provides access to emerging markets with burgeoning chip demands, further bolstering its future prospects.

    🐌 Key considerations before investing in Cadence Design Systems

    While Cadence navigates the silicon maze with its design expertise and technological prowess, there are some potential roadblocks to consider before joining this high-stakes journey:

    • Valuation Concerns: Like many established tech companies, CDNS's stock can be volatile, and the current price might reflect expectations of future technological breakthroughs and market trends. A cautious approach with a patient, long-term perspective is wise.
    • Economic Jitters: Global economic downturns can impact consumer demand for electronic devices, potentially hitting chipmakers and indirectly impacting Cadence's business. Close monitoring of economic trends and their impact on the tech sector is crucial.
    • Technological Leapfrogs: Advances in chip design and manufacturing processes could disrupt traditional methods and challenge Cadence's focus on existing EDA tools. Stay informed about industry trends and how Cadence plans to adapt and innovate.
    • Geopolitical Tensions: Trade wars and international conflicts can disrupt supply chains and impact access to critical materials, potentially impeding Cadence's operations and profitability. Monitor geopolitical developments and their potential impact on the semiconductor sector.

    Final thoughts on Cadence Design Systems

    Cadence's design leadership, diversifying offerings, commitment to innovation, and global reach paint a potentially promising picture for long-term investors seeking exposure to the dynamic semiconductor and software sectors. However, the volatile nature of the stock, economic sensitivity, potential technological disruption, and geopolitical tensions warrant a measured approach. Thorough research, analysis of Cadence's future plans and the tech landscape, and a clear understanding of your risk tolerance are crucial before joining this tech expedition. Remember, navigating the intricate terrain of tech stocks requires both a discerning eye for cutting-edge solutions and a balanced perspective on potential challenges. Choose wisely, and your portfolio might just find itself conducting a harmonious melody alongside the technological success story of Cadence Design Systems.

  • KLA Corporation (KLAC)

    In the intricate realm where silicon whispers possibilities and nanomachines dance in precise unison, KLA Corporation reigns supreme. This semiconductor giant isn't just scrubbing dust off chips; it's orchestrating a technological symphony, composing the blueprints for tomorrow's devices with innovative tools and meticulous analysis. But can this silicon sculptor translate its microscopic mastery into rewarding returns for your portfolio? Let's explore the hidden currents propelling KLA's rise, alongside the potential glitches to consider before joining this tech odyssey.

    KLA Corporation financial statements

    Analysts recommendation: 1.9

    Financial Health

    • Return on assets (ROA): 19.9%
    • Return on equity (ROE): 90.58%
    • Return on investment (ROI): 30.91%

    Profitability

    • Gross margin: 60.98%
    • Operating margin: 39.63%
    • Net profit margin: 28.97%

    Growth

    • EPS (past 5 years): 22.04%
    • EPS (current): 21.9
    • EPS estimate (next quarter): 7.79
    • EPS growth (this year): 29.16%
    • EPS growth (next year): 7.7%
    • EPS growth (next 5 years): 15.04%
    • EPS growth (quarter-over-quarter): 29.71%
    • Sales growth (past 5 years): 17.33%
    • Sales growth (quarter-over-quarter): 18.61%

    💡 Why invest in KLA Corporation?

    KLA's robust profile presents a compelling case for investors seeking exposure to the ever-evolving semiconductor sector. Here's what fuels its engine of silicon success:

    • Chip Whisperer: KLA boasts unrivalled expertise in process control and yield management, ensuring the flawless crafting of semiconductors - the brains behind modern technology. This leadership in micro-manufacturing translates to consistent contracts and predictable revenue streams, providing a strong foundation for future growth.
    • Beyond the Microscope: Recognizing the changing landscape of electronics, KLA diversifies its repertoire, investing in advanced technologies like AI-powered inspection systems and materials analysis tools. This strategic expansion mitigates risk and unlocks diverse avenues for growth beyond traditional chip cleaning.
    • Innovation Alchemist: From defect detection at the atomic level to data-driven process optimization, KLA invests heavily in R&D, striving to push the boundaries of semiconductor technology. This commitment to innovation ensures its offerings remain relevant and future-proofs its operations.
    • Global Chipmaker's Chorus: With operations spanning continents, KLA taps into diverse technology needs and unlocks international growth potential. This global reach provides access to emerging markets with burgeoning chip demands, further bolstering its future prospects.

    🐌 Key considerations before investing in KLA Corporation

    While KLA navigates the silicon maze with its micro-manufacturing expertise and innovative solutions, there are some potential roadblocks to consider before joining this high-stakes journey:

    • Valuation Concerns: Like many established tech companies, KLA's stock can be volatile, and the current price might reflect expectations of future technological breakthroughs and market trends. A cautious approach with a patient, long-term perspective is wise.
    • Economic Jitterbug: Global economic downturns can impact consumer demand for electronic devices, potentially hitting KLA's semiconductor customers and its profitability. Close monitoring of economic trends and their impact on the tech sector is crucial.
    • Technological Leapfrogs: Rapid advancements in chip design and manufacturing processes could disrupt traditional methods and challenge KLA's focus on existing technologies. Stay informed about industry trends and how KLA plans to adapt and innovate.
    • Geopolitical Tensions: Trade wars and international conflicts can disrupt supply chains and impact access to critical materials, potentially impacting KLA's operations and profitability. Monitor geopolitical developments and their potential impact on the semiconductor sector.

    Final thoughts on KLA Corporation

    KLA's micro-manufacturing mastery, diversifying offerings, commitment to innovation, and global reach paint a potentially promising picture for long-term investors seeking exposure to the dynamic semiconductor sector. However, the volatile nature of the stock, economic sensitivity, potential technological disruption, and geopolitical tensions warrant a measured approach. Thorough research, analysis of KLA's future plans and the tech landscape, and a clear understanding of your risk tolerance are crucial before joining this tech expedition. Remember, navigating the intricate terrain of semiconductor stocks requires both a discerning eye for microscopic solutions and a balanced perspective on potential challenges. Choose wisely, and your portfolio might just etch itself into the silicon success story of KLA Corporation.

  • Monolithic Power Systems (MPWR)

    Forget bulky transformers and inefficient circuits, Monolithic Power Systems is a hidden champion behind the smooth operation of your everyday electronics. Founded in 1997 and headquartered in Kirkland, Washington, MPS isn't a company you necessarily interact with directly, but their innovative technology is embedded in countless devices. Imagine them as the efficiency engineers of the electronics world. They specialize in designing and manufacturing tiny, highly efficient power management integrated circuits (ICs). These ICs control and regulate power flow within electronic devices, ensuring they function properly without wasting energy. From smartphones and laptops to data centers and industrial automation systems, MPS's solutions are essential for a wide range of electronics. Their focus on miniaturization and efficiency aligns perfectly with the ever-shrinking size and growing power demands of modern electronics.

    Monolithic Power Systems financial statements

    Analysts recommendation: -0.52

    Financial Health

    • Return on assets (ROA): 16.88%
    • Return on equity (ROE): 20.37%
    • Return on investment (ROI): 18.61%

    Profitability

    • Gross margin: 24.13%
    • Operating margin: 21.7%
    • Net profit margin: 931.11%

    Growth

    • EPS (past 5 years): 30%
    • EPS (current): 8.41
    • EPS estimate (next quarter): 3.96
    • EPS growth (this year): 18.12%
    • EPS growth (next year): 24.52%
    • EPS growth (next 5 years): 31.34%
    • EPS growth (quarter-over-quarter): 0.48%
    • Sales growth (past 5 years): 27.08%
    • Sales growth (quarter-over-quarter): 15.03%

    💡 Why invest in Monolithic Power Systems?

    Why Consider Monolithic Power Systems for Your Portfolio?

    • Strong Growth Potential: The increasing demand for smaller, more powerful electronics creates a favorable environment for MPWR's products.
    • Essential for Electronics: Power management ICs are fundamental components in most electronic devices, making MPWR's products crucial for the continued miniaturization and efficiency of electronics.
    • Diversified Revenue Streams: MPWR caters to a wide range of electronic applications, reducing their dependence on any single market segment.
    • Focus on Innovation: MPWR actively invests in research and development to stay ahead of the curve in power management technology.
    • Strong Financial Performance: MPWR boasts a history of consistent revenue and profit growth.

    🐌 Key considerations before investing in Monolithic Power Systems

    Challenges to Consider

    • Competition: The semiconductor industry is fiercely competitive, with established players and nimble startups vying for market share.
    • Fluctuations in Chip Demand: The demand for electronic devices and MPWR's ICs can be cyclical and influenced by economic conditions.
    • Reliance on Manufacturing: MPWR relies on outsourced manufacturing facilities, which can introduce potential supply chain disruptions.
    • Geopolitical Tensions: Trade tensions and global instability can impact MPWR's ability to source materials and manufacture products.

    Final thoughts on Monolithic Power Systems

    Monolithic Power Systems' strong track record, focus on innovation, diversified product portfolio, and essential role in the electronics industry paint a promising picture for long-term investors seeking exposure to the technology sector. However, the competitive landscape, cyclical demand, reliance on manufacturing, and geopolitical risks necessitate careful consideration. Thorough research on global chip demand forecasts, MPWR's innovation pipeline, their strategies for mitigating these challenges, and a clear understanding of your risk tolerance are crucial before adding Monolithic Power Systems to your portfolio. Remember, even the most sophisticated gadgets rely on efficient power management, and MPWR is a key player in making it happen.

  • Applied Materials (AMAT)

    Applied Materials Inc. isn't your everyday manufacturer. Founded in 1967 and headquartered in Santa Clara, California, they're the invisible hand behind the technological revolution. Forget about finished products; Applied Materials is the maestro of materials engineering, crafting the foundation upon which modern electronics are built. Imagine them as the alchemists of the digital age, wielding cutting-edge technology to transform raw materials into the microscopic marvels that power our smartphones, computers, and countless other devices. Their expertise in depositing, etching, and shaping materials at the atomic level allows them to create the ultra-thin films and intricate patterns that form the heart of every semiconductor chip. Their dedication to innovation and their role in the foundation of modern technology positions them as a key player in the ever-evolving semiconductor industry.

    Applied Materials financial statements

    Analysts recommendation: -0.56

    Financial Health

    • Return on assets (ROA): 23.26%
    • Return on equity (ROE): 43.91%
    • Return on investment (ROI): 29.52%

    Profitability

    • Gross margin: 28.99%
    • Operating margin: 27.78%
    • Net profit margin: 203.92%

    Growth

    • EPS (past 5 years): 22.34%
    • EPS (current): 8.9
    • EPS estimate (next quarter): 2.19
    • EPS growth (this year): 6.01%
    • EPS growth (next year): 13.91%
    • EPS growth (next 5 years): 10.56%
    • EPS growth (quarter-over-quarter): 10.61%
    • Sales growth (past 5 years): 10.73%
    • Sales growth (quarter-over-quarter): 5.52%

    💡 Why invest in Applied Materials?

    Applied Materials' unique position in the semiconductor supply chain offers several potential advantages for investors seeking exposure to this critical sector:

    • Essential for Technological Advancement: Modern electronics rely on ever-smaller, more powerful chips. Applied Materials' technology is crucial for producing these chips, making them a vital player in technological progress.
    • Strong Industry Growth: The demand for semiconductors is expected to continue growing due to the increasing adoption of technology across various sectors. This bodes well for Applied Materials' future.
    • Diversified Product Portfolio: They cater to a wide range of chip types, from logic chips for computers to memory chips for smartphones, reducing their dependence on any single market segment.
    • Global Presence: Applied Materials operates worldwide, ensuring a steady stream of revenue and positioning them to benefit from growth in emerging markets.

    🐌 Key considerations before investing in Applied Materials

    However, before investing in Applied Materials, it's crucial to consider the potential challenges they face:

    • Cyclicality of the Semiconductor Industry: The demand for chips can be cyclical, impacted by economic downturns and fluctuations in consumer spending. Applied Materials' revenue can be affected by these cycles.
    • Competition: The semiconductor equipment market is fiercely competitive, with established players and ambitious startups vying for market share. Maintaining their technological edge will be critical.
    • Geopolitical Tensions: Geopolitical tensions can disrupt supply chains and impact the availability of raw materials essential for chip production.
    • Rapid Technological Advancements: The semiconductor industry is constantly evolving. Applied Materials must continuously innovate to stay ahead of the curve.

    Final thoughts on Applied Materials

    Applied Materials' strong position in the semiconductor supply chain, their diversified product portfolio, and global reach paint a promising picture for long-term investors seeking exposure to the ever-growing semiconductor industry. However, the cyclical nature of the industry, competition, geopolitical tensions, and the need for continuous innovation necessitate careful consideration. Thorough research on global chip demand forecasts, Applied Materials' innovation pipeline, their strategies for navigating these challenges, and a clear understanding of your risk tolerance are crucial before adding Applied Materials to your portfolio. Remember, the future of technology is built on the foundation of intricate materials engineering, and Applied Materials plays a vital role in that process. Their story could be a foundational investment in your journey.

  • Qualcomm (QCOM)

    In the silicon valleys where ones and zeros whisper promises and processors orchestrate digital symphonies, Qualcomm reigns supreme. This chipmaking giant isn't just crafting silicon squares; it's paving the way for a hyperconnected future, powering smartphones, 5G networks, and the very fabric of the digital world.

    Qualcomm financial statements

    Analysts recommendation: 1.97

    Financial Health

    • Return on assets (ROA): 17.34%
    • Return on equity (ROE): 38.92%
    • Return on investment (ROI): 23.01%

    Profitability

    • Gross margin: 55.9%
    • Operating margin: 25.5%
    • Net profit margin: 23.32%

    Growth

    • EPS (past 5 years): N/A
    • EPS (current): 7.71
    • EPS estimate (next quarter): 2.54
    • EPS growth (this year): 19.23%
    • EPS growth (next year): 11.22%
    • EPS growth (next 5 years): 10.96%
    • EPS growth (quarter-over-quarter): 17.04%
    • Sales growth (past 5 years): 11.93%
    • Sales growth (quarter-over-quarter): 11.15%

    💡 Why invest in Qualcomm?

    Mobile dominance, 5G symphony conductor, innovation ecosystem weaver, and global footprint expansionist make QCOM a potentially rewarding tech investment.

    • Mobile Dominance: Qualcomm chips rule the roost in smartphones, boasting partnerships with leading phone manufacturers and controlling a sizeable share of the mobile processor market, ensuring robust and predictable revenue streams.
    • 5G Symphony Conductor: As the 5G revolution unfolds, Qualcomm stands at the helm, supplying cutting-edge modems and network infrastructure solutions, unlocking vast growth potential in a rapidly expanding landscape.
    • Innovation Ecosystem Weaver: Beyond chips, Qualcomm invests heavily in R&D, developing next-generation technologies like artificial intelligence and autonomous driving, solidifying its position at the forefront of digital advancements.
    • Global Footprint Expansionist: With operations spanning continents, Qualcomm taps into diverse technological needs and unlocks international growth potential, particularly in emerging markets eager to adopt 5G technology.

    🐌 Key considerations before investing in Qualcomm

    Valuation concerns, semiconductor volatility, competition heats up, and geopolitical tensions present potential roadblocks for QCOM investors.

    • Valuation Concerns: Like many established tech players, QCOM's stock currently sits near all-time highs, demanding a cautious approach due to potentially limited immediate gains. A patient, long-term perspective might be prudent.
    • Semiconductor Volatility: The chipmaking industry is notoriously cyclical and susceptible to supply chain disruptions and economic downturns, adding a layer of uncertainty to Qualcomm's performance.
    • Competition Heats Up: Ambitious rivals like MediaTek and Huawei are nipping at Qualcomm's heels, requiring constant innovation and strategic maneuvers to maintain market share.
    • Geopolitical Tensions: Trade disruptions and international politics can impact Qualcomm's supply chains and operations, demanding careful monitoring of global developments.

    Final thoughts on Qualcomm

    Qualcomm's mobile dominance, 5G leadership, unwavering innovation, and global reach paint a potentially rewarding picture for long-term investors seeking exposure to the cutting edge of the tech sector. However, near-peak valuation, semiconductor volatility, rising competition, and geopolitical uncertainties warrant a measured approach. Thorough research, analysis of Qualcomm's future plans and market dynamics, and a clear understanding of your risk tolerance are crucial before embarking on this digital odyssey. Remember, navigating the intricate currents of tech stocks requires both a discerning eye for innovative technologies and a balanced perspective on potential headwinds. Choose wisely, and your portfolio might just unlock the boundless potential of a hyperconnected future, powered by the intricate symphony of Qualcomm's chipmaking prowess.

If you are interested in other stock categories, check out my other lists of the best large-cap retail, financial, healthcare, energy, tech, industrial, semiconductor, utility, basic materials stocks.