The semiconductor world is buzzing with growth, and small-cap semiconductor stocks are becoming a hot topic for investors. With technology advancing at lightning speed, the need for chips in everything from smartphones to electric cars is soaring. This surge is giving smaller, innovative companies a chance to shine and make their mark. For those ready to look beyond the big players, there’s a lot of potential for impressive returns.
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The global semiconductor market size was valued at USD 611.35 billion in 2023 and is projected to grow from USD 681.05 billion in 2024 to USD 2062.59 billion by 2032.
Sectors to be Impacted by Semiconductor Innovation
The growth of the semiconductor industry is pivotal to the global economy. As our dependence on digital technologies intensifies, the demand for chips has surged across various sectors. Here are a three key areas that we believe will be impacted:
1. Automotive Sector
- By 2030, semiconductor content in an SAE Level 4 electric car could cost about USD 4,000, compared to USD 500 in a traditional SAE Level 1 car.
2. Computation and Data Storage
- Projected growth of 4–6%.
- Driven by increased demand for servers supporting AI and cloud computing.
3. Wireless and Emerging Technologies
- Innovations in virtual reality (VR), augmented reality (AR), and the Internet of Things (IoT).
- Creating new avenues for semiconductor demand.
AI Chip Surge: Uncovering Opportunities
Small-cap semiconductor stocks to buy are at the forefront of innovative technologies driving industry growth. The Internet of Things (IoT) explosion, fuelled by 5G, has created a demand for low-power, high-performance chips designed for smaller, battery-powered devices. This presents opportunities for under-the-radar semiconductor companies specializing in IoT solutions.
Artificial Intelligence (AI) is another game-changer, with edge computing requiring chips capable of on-device AI processing for quicker response times. The adoption of advanced packaging technologies, such as 3D stacking and chipset integration, has become prevalent to meet the stringent requirements of 5G. These innovations have led to significant advancements in semiconductor design, characterized by miniaturization and integration. Small cap semiconductor companies focusing on these cutting-edge technologies are well-positioned to capitalize on the industry’s growth potential. Below are some companies that we think are worth a taking a closer look at.
Small-Cap Semiconductor Stocks to Consider
Axcelis Technologies (ACLS)
Company Overview
Axcelis Technologies, Inc. (NASDAQ: ACLS) is a leading provider of ion implantation systems for the semiconductor industry. The company’s goal is to help semiconductor manufacturers achieve the highest quality and yield with the lowest cost of ownership . Founded in 1978, Axcelis has been at the forefront of ion implantation technology, introducing the world’s first high current production implantation system.
Recent Performance
Axcelis has shown strong financial performance in recent years. From 2020 to 2023, the company’s revenue grew at a compound annual growth rate (CAGR) of 33.5%, while its earnings per share (EPS) rose at a CAGR of 72%. In 2023, Axcelis reported total revenue of $1.11 billion and net income of $239.45 million. However, the company has experienced a slight slowdown recently, with revenue rising 23% in 2023 compared to 39% growth in 2022.
Growth Drivers
Axcelis’ growth has been driven by several factors:
- Silicon Carbide (SiC) Market: In 2023, 34% of Axcelis’ total system revenue came from the SiC market . SiC chips are crucial for electric vehicles, 5G base stations, and other high-performance applications.
- Memory Chip Market: The cyclical recovery of the memory chip market has contributed to Axcelis’ growth.
- Emerging Technologies: The expansion of 5G, data analytics, and artificial intelligence (AI) markets has boosted demand for Axcelis’ products.
Navitas Semiconductor (NVTS)
Company Overview
Navitas Semiconductor (NASDAQ: NVTS) is a leading provider of next-generation power semiconductors, specializing in gallium nitride (GaN) power ICs and silicon carbide (SiC) technology. Founded in 2024, the company has been at the forefront of power innovation for a decade. Navitas has developed ultra-efficient GaN semiconductors that are revolutionizing power electronics in terms of efficiency, performance, size, cost, and sustainability.
Gallium Nitride advantages
GaN technology offers several advantages over traditional silicon semiconductors:
- Higher electron mobility and saturation velocity, enabling high-speed operations.
- Wide band-gap, allowing for high breakdown voltage capabilities and efficient power handling.
- Excellent thermal conductivity, improving heat dissipation and device reliability.
- Miniaturization capabilities, enabling smaller and lighter devices.
- Superior energy efficiency, leading to lower power consumption and reduced system costs.
Navitas’ GaNFast ICs integrate GaN power with drive, control, and protection into a single chip, enabling up to 100 times faster switching speeds and increasing energy savings by as much as 40%.
Recent deals and growth
Navitas has experienced significant growth and secured several important deals:
- The company’s revenue grew 73.49% to $23.18 million in Q2 2024 compared to the same quarter the previous year.
- Navitas has won design victories with major power supply companies and expects “multiple millions” in revenues this year.
- The company has introduced 20 additional fast charger devices, bringing the total number of released consumer products to over 450.
- Navitas now powers chargers for Samsung’s new Galaxy Z Flip6, Z Fold6, and all A-series phones.
Future outlook
Navitas is well-positioned for future growth:
- The company has a strong customer pipeline worth $1.60 billion by the end of Q1 2024.
- Navitas is developing server power platforms increasing from 3kW to up to 10kW to meet the growing demand for AI data centers.
- The GaN semiconductor industry is expected to reach a value of $33.00 billion by 2031.
- Navitas is engaged with over 160 EV-related customers across all major regions.
- The company is expanding into solar and industrial applications, winning 6 new designs across US, Europe, and Asia for various solar-related products.
The Takeaway
The small-cap semiconductor industry is revolutionizing the tech world, offering exciting investment opportunities. Companies like Navitas Semiconductor and Axcelis Technologies could be small-cap gems to get a foothold in this growing sector. As global demand for advanced chips grows, these innovative and adaptable companies are well-positioned to thrive.
