To The Moon

I believe we have all seen how Artificial Intelligence (AI) boom was driven by $NVIDIA Corp(NVDA)$ $Advanced Micro Devices(AMD)$ , this has help the semiconductor stocks to surge nicely, though we are seeing some minor correction recently.

$VanEck Semiconductor ETF(SMH)$ is up 28.66% YTD, and it is now tough to find a group of semiconductors in the computer and technology sector that are still considered conservatively cheap unless they are severely underperforming or are frankly boring.

The market size of Discrete Semiconductor is set to grow at 8.4% CAGR, and with the boost from AI, I would think this is a potential area to tap into.

I would think many of us thought of semiconductors referring to all computer chips, considered integrated circuits (ICs) or microchips containing multiple electronic components that include capacitors, transistors and resistors integrated into a single silicon wafer.

So in this article I would be sharing what is Discrete Semiconductors? Which stocks have potential in this segment of the semiconductor industry.

What are Discrete Semiconductors?

Discrete semiconductors are individual electronic components that perform specific electronic functions like controlling and amplifying electric currents or voltages and switching circuits. Passive electronic components do not require a power source and don’t amplify or control electronic signals but instead store, filter or regulate electrical energy like capacitors and resistors.

I would like to share 2 discrete semiconductor stocks which seem to be underperforming, and they are kind of boring, so most investors would not have them in their watchlist. But there are signals that they are coming up.

$Vishay Intertechnology(VSH)$

Vishay Intertechnology is a global manufacturer of discrete semiconductors and passive electronic components for auto, industrial and consumer electronics. Vishay is partnered with original electronics manufacturers (OEMs), including Tesla, Apple, Honeywell, LG Electronics, Sony and Medtronic. They happens to have one of the world's largest semiconductor portfolios, supplying electronic components to various end markets from industrial to automotive sectors. Their semiconductors include metal oxide semiconductor field effect transistors (MOSFETs) used for switching and amplifying electronic signals, diodes, and optoelectronic components.

On Feb. 7, 2024, Vishay reported an EPS of 37 cents, beating consensus estimates of 36 cents by a penny. Revenues fell 8.2% YoY to $785.24 million versus $787.15 million. The book-to-bill ratio was 0.75, with the end of the quarter backlog of 5.3 months. The company expected Q1 2024 revenues between $715 million to $755 million versus $795.1 million.

If we looked at how Vishay has gathered much buying sentiment in recent weeks, we could be seeing more upside, and I would consider its current stock price to be cheap.

$STMicroelectronics NV(STM)$

STMicroelectronics discrete semiconductors can be found in Internet-of-Things (IoT) sensors to solar panels and electric vehicles (EVs) and indicate discrete semiconductor recovery could be a second-half 2024 story. They provides automotive microchips and discrete semiconductors. Its components can be found throughout consumer electronics and computer peripherals. STM supplies semiconductors essential for clean energy, solar, car electrification and car digitalization trends. Its discrete semiconductors are found in a large range of low-power, high-performance industrial sensors used in IoT and pressure sensors for airtight and waterproof applications. Get AI-powered insights on MarketBeat.

STM reported Q4 2023 EPS of $1.14, beating consensus analyst estimates of 95 cents by 19 cents. Revenues fell 3.2% YoY to $4.28 billion versus $4.31 billion. The gross margin was 45.5%, and the operating margin was 23.9% on a net income of $1.08 billion. Full-year 2023 net revenues were $17.29 billion with a gross margin of 47.9% and an operating margin of 26.7% on a net income of $4.21 billion.

STM issued downside guidance for Q1 2024 revenues of $3.6 billion versus $4.08 billion consensus estimates. Gross margin is expected around 42.3% plus or minus 200 basis points. Full year 2024 revenues are expected between $15.9 billion to $16.9 million versus $17.29 billion consensus estimates with gross margin in the low to mid 40% range.

Here we could see that STM is currently trending lower and there have been more selling than buying, but I would think if the demand for discrete chip goes up, STM should benefit from it.

Summary

To me, there are many opportunities in semiconductor beyond the usual big names that we have seen, these could be future big players in semiconductor as we moved slowly into consumer based electronic.

AI would be evolving to be available in our mobile phone, as we have heard the news of Apple looking to have Gemini in their phones, they will be more of such cases, soon we will see appliances that we are in touch with everyone, will have one form of AI or another.

Appreciate if you could share your thoughts in the comment section whether you think it is a good time to look into Vishay and STMicroelectronic.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.