Semiconductors are the core infrastructure powering the Information Age. But they’re also susceptible to economic fluctuations as chip demand will ebb and flow with capital spending. Unfortunately, the market seems to be predicting a downturn as the industry has tumbled by 4.5% over the past six months. This drop is a stark contrast from the S&P 500’s 11.3% gain.

The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. Taking that into account, here is one semiconductor stock poised to generate sustainable market-beating returns and two that may face trouble.

Two Semiconductor Stocks to Sell:

Intel (INTC)

Market Cap: $97.34 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?

1. Sales tumbled by 5.9% annually over the last five years, showing market trends are working against its favor during this cycle
2. Operating profits fell over the last five years as its sales dropped and it struggled to adjust its fixed costs
3. Capital intensity has ramped up over the last five years as its free cash flow margin decreased by 31.3 percentage points

At $22.54 per share, Intel trades at 25x forward price-to-earnings. To fully understand why you should be careful with INTC, check out our full research report (it’s free).

Qorvo (QRVO)

Market Cap: $7.19 billion

Formed by the merger of TriQuint and RF Micro Devices, Qorvo (NASDAQ: QRVO) is a designer and manufacturer of RF chips used in almost all smartphones globally, along with a variety of chips used in networking equipment and infrastructure.

Why Do We Think QRVO Will Underperform?

1. 3.9% annual revenue growth over the last five years was slower than its semiconductor peers
2. Day-to-day expenses have swelled relative to revenue over the last five years as its operating margin fell by 16.6 percentage points
3. Free cash flow margin shrank by 13.2 percentage points over the last five years, suggesting the company is consuming more capital to stay competitive

Qorvo is trading at $77.15 per share, or 14.2x forward price-to-earnings. Dive into our free research report to see why there are better opportunities than QRVO.

One Semiconductor Stock to Watch:

Qualcomm (QCOM)

Market Cap: $188.2 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 Does QCOM Stand Out?

1. Healthy operating margin of 24.6% shows it’s a well-run company with efficient processes
2. Robust free cash flow margin of 29.4% gives it many options for capital deployment, and its recently improved profitability means it has even more resources to invest or distribute
3. ROIC punches in at 52.5%, illustrating management’s expertise in identifying profitable investments

Qualcomm’s stock price of $170.26 implies a valuation ratio of 14.7x forward price-to-earnings. Is now a good time to buy? Find out in our full research report, it’s free.

Stocks We Like Even More

The elections are now behind us. With rates dropping and inflation cooling, many analysts expect a breakout market - and we’re zeroing in on the stocks that could benefit immensely.

Take advantage of the rebound by checking out our Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 175% over the last five years.

Stocks that made our list in 2019 include now familiar names such as Nvidia (+2,183% between December 2019 and December 2024) as well as under-the-radar businesses like Sterling Infrastructure (+1,096% five-year return). Find your next big winner with StockStory today for free.