Semiconductors are the silicon backbone of the digital revolution. The way we live and work is also changing with AI, which is creating secular demand for more powerful chips. This theme has led to decent stock price performance as the industry’s six-month gain of 10.3% has nearly mirrored the S&P 500.
Although these businesses have produced results lately, investors should tread carefully as not all companies are equipped for the next technological innovation. Keeping that in mind, here are three semiconductor stocks best left ignored.
NXP Semiconductors (NXPI)
Market Cap: $59.91 billion
Spun off from Dutch electronics giant Philips in 2006, NXP Semiconductors (NASDAQ: NXPI) is a designer and manufacturer of chips used in autos, industrial manufacturing, mobile devices, and communications infrastructure.
Why Are We Wary of NXPI?
- Sales stagnated over the last two years and signal the need for new growth strategies
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 15.7%
NXP Semiconductors is trading at $240.61 per share, or 13.7x forward P/E. Dive into our free research report to see why there are better opportunities than NXPI.
Qualcomm (QCOM)
Market Cap: $187.6 billion
Having been at the forefront of developing the standards for cellular connectivity for over four decades, Qualcomm (NASDAQ:QCOM) is a leading innovator and a fabless manufacturer of wireless technology chips used in smartphones, autos and internet of things appliances.
Why Is QCOM Not Exciting?
- The company has faced growth challenges as its 8.6% annual revenue increases over the last two years fell short of other semiconductor companies
- Sales are projected to tank by 2.9% over the next 12 months as demand evaporates
- Efficiency has decreased over the last five years as its operating margin fell by 12.7 percentage points
At $178.02 per share, Qualcomm trades at 18.7x forward P/E. To fully understand why you should be careful with QCOM, check out our full research report (it’s free).
Photronics (PLAB)
Market Cap: $1.69 billion
Sporting a global footprint of facilities, Photronics (NASDAQ:PLAB) is a manufacturer of photomasks, templates used to transfer patterns onto semiconductor wafers.
Why Are We Cautious About PLAB?
- Flat sales over the last two years suggest it must find different ways to grow during this cycle
- Demand will likely be soft over the next 12 months as Wall Street’s estimates imply tepid growth of 2.2%
- Gross margin of 34.7% is below its competitors, leaving less money to invest in areas like marketing and R&D
Photronics’s stock price of $29.42 implies a valuation ratio of 13.8x forward P/E. Read our free research report to see why you should think twice about including PLAB in your portfolio.
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Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,460% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+1,154% between June 2020 and June 2025). Find your next big winner with StockStory today.