This article was originally published on Forbes on Jul 13, 2023,07:05pm EDTForbes Forbes on Jul 13, 2023,07:05pm EDT
Semiconductors are the common denominator across the burgeoning technology trends of the next decade. Artificial Intelligence, 5G, high-performance computing, Internet-of-Things, gaming, electric vehicles, and robotics, among others, all require semiconductors to power them. These trends make semiconductor stocks an ideal investment and perhaps the most important space for tech investors to monitor.
For years now, we have published on semiconductors as leaders in tech– even when cloud, e-commerce, connected TV and others were more favored. In fact, we have been pointing out quite clearly that semiconductors are the sector that has provided the most returns in the past decade.
Source: Beth Kindig
Below, we update our semiconductor sector analysis to look at which companies have performed well in the most recent quarter, and also which companies stand out on a forward-basis with revenue growth estimates, profits, cash flows, earnings surprises, and we also look into management insights.
Top Semiconductor Stocks with the highest revenue growth rates in Q1
Source: YCHARTS
Navitas Semiconductor had the highest revenue growth among semiconductor stocks in the recent quarter. The company’s revenue grew by 98% YoY to $13.4 million. Management’s revenue guidance for next quarter is $16 million to $17 million, representing YoY growth of 92% at the mid-point.
Ron Shelton, CFO of the company, said in the earnings call, “Our guidance is based on robust strength in EV, solar, appliance/industrial, and the beginnings of a recovery in the mobile and consumer market, all further evidenced by a more than 50% increase in backlog during the quarter.”
The company acquired GeneSiC Semiconductor in August last year and helped to diversify into the fast-growing Silicon Carbide market. Navitas has a strong pipeline of $760 million with $432 million of this recognized by fiscal year 2026.
Analysts expect revenue in the next quarter to grow 92% YoY to $16.51 million and robust revenue growth close to or over 100% on a YoY basis for the next several quarters. The risk to consider is that the bottom line is weak. Analysts don’t expect Navitas to be profitable on an adjusted basis until Q1 2025 and GAAP profitable roughly around 2027.
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Semi Stocks Q1 Revenue Surprise
Source: YCHARTS
Nvidia crushed analysts’ revenue estimates by 10.4%. The company’s revenue declined by (13%) YoY and is up 19% QoQ to $7.19 billion.
The strong sequential growth was led by record data center revenue, primarily helped by accelerated computing. The company’s CFO, Colette Kress, said in the earnings call, “Generative AI drove significant upside in demand for our products, creating opportunities and broad-based global growth across our markets.” Gaming and professional visualization segments also witnessed improvement from the inventory correction.
If Nvidia is adding roughly $4 billion in revenue, primarily driven by the data center, then Q2’s data center growth will accelerate to an incredible 100% growth rate, up from $3.8 billion in the year ago quarter. It also means the data center will roughly double from the first quarter (sequentially) as the segment was $4.28B in the current quarter.
Put another way, this means Nvidia’s data center segment in the upcoming quarter will be as large as the company’s entire revenue this quarter – if we assume $7.75B in the data center compared to $7.2B total revenue this quarter.
We have highlighted in the past that AI will add $15 trillion to GDP compared to mobile’s $4.4 trillion. Mobile brought us three FAANGs: Apple, Google, and Facebook. It has been my stance for years that AI will bring us a new set of FAANGs, one of which will be Nvidia.
The company’s revenue guidance for the next quarter is $11 billion, representing YoY growth of 64% at the midpoint. The Q2 guidance was 53% higher than consensus. The historic beat in estimates is driven by data center revenue doubling from $4.28 billion in revenue in Q1 to $8 billion in revenue in Q2.
Semiconductor Stocks Q2 Revenue Growth Estimates
Source: YCHARTS
Indie Semiconductor has the highest expected revenue growth rate for Q2. The company’s recent quarter revenue grew by 84% YoY to $40.5 million. The company has guided for 102% YoY revenue growth in the next quarter.
Analysts expect revenue to grow 102% YoY to $51.97 million. The company is benefiting from growth trends in advanced-driver assistance systems (ADAS) and electric vehicles. indie has a large Serviceable Addressable Market (SAM) of $56 billion by 2028. The company is on track to be profitable on an adjusted basis this year.
