Semiconductors are the core infrastructure powering the Information Age. The way we live and work is also changing with AI, which is creating secular demand for more powerful chips. As a result, the industry has seen solid stock price performance over the last six months as its gain of 62% has outpaced the S&P 500’s 7.6% return.
Nevertheless, a cautious approach is imperative because Moore’s Law (a principle stating that computer productivity doubles every two years) will eventually make even the most impactful technologies today obsolete. With that said, here is one semiconductor stock poised to generate sustainable market-beating returns and two we’re steering clear of.
Two Semiconductor Stocks to Sell:
Intel (INTC)
Market Cap: $222.9 billion
Inventor of the x86 processor that powered decades of technological innovation in PCs, data centers, and numerous other markets, Intel (NASDAQ: INTC) is a leading manufacturer of computer processors and graphics chips.
Why Do We Avoid INTC?
- Customers postponed purchases of its products and services this cycle as its revenue declined by 6.2% annually over the last five years
- Performance over the past five years shows each sale was less profitable as its earnings per share dropped by 40.1% annually, worse than its revenue
- Free cash flow margin dropped by 18.3 percentage points over the last five years, implying the company became more capital intensive as competition picked up
Intel’s stock price of $44.57 implies a valuation ratio of 100.4x forward P/E. Read our free research report to see why you should think twice about including INTC in your portfolio.
onsemi (ON)
Market Cap: $26.82 billion
Spun out of Motorola in 1999 and built through a series of acquisitions, onsemi (NASDAQ: ON) is a global provider of analog chips specializing in autos, industrial applications, and power management in cloud data centers.
Why Are We Cautious About ON?
- Products and services are facing significant end-market challenges during this cycle as sales have declined by 14.8% annually over the last two years
- Estimated sales growth of 4.9% for the next 12 months is soft and implies weaker demand
- Efficiency has decreased over the last five years as its operating margin fell by 17.7 percentage points
At $68.10 per share, onsemi trades at 24.3x forward P/E. If you’re considering ON for your portfolio, see our FREE research report to learn more.
One Semiconductor Stock to Buy:
Nova (NVMI)
Market Cap: $13.13 billion
Headquartered in Israel, Nova (NASDAQ: NVMI) is a provider of quality control systems used in semiconductor manufacturing.
Why Are We Bullish on NVMI?
- Market share has increased this cycle as its 30.4% annual revenue growth over the last two years was exceptional
- Earnings per share grew by 33.2% annually over the last five years and trumped its peers
- Robust free cash flow margin of 28.1% gives it many options for capital deployment
Nova is trading at $437.50 per share, or 44.1x forward P/E. Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More
Your portfolio can’t afford to be based on yesterday’s story. The risk in a handful of heavily crowded stocks is rising daily.
The names generating the next wave of massive growth are right here in our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-micro-cap company Kadant (+351% five-year return). Find your next big winner with StockStory today.
