For those looking for semiconductor exposure, you'll likely be thinking you need to head south of the border, or even internationally.
However, there are some top Canadian semiconductor stocks that you can buy right on the Canadian exchanges. They just aren't as notable of names such as Taiwan Semiconductor (TSM), Advanced Micro Devices (AMD), or Nvidia (NVDA). Canadian stocks are sometimes overlooked across various different industries.
Why Canadian semiconductor stocks?
Unless you've been living under a rock, you likely know that there has been a large semiconductor shortage ever since the COVID-19 pandemic started. Supply chain issues along with semiconductor companies simply not being able to keep up due to high demand created a bottleneck in the industry.
Yes, it has calmed down in recent times. However, semiconductor stocks are still expected to be in high demand for the foreseeable future.
Whether it is your automobile, smartphone, or tablet, semiconductors are critical to electronics and their demand will only continue to grow, especially as we enter new fields like the Internet of things and artificial intelligence. Without these products sectors like the top Metaverse stocks in Canada would not be possible.
For seasoned investors or those just learning how to buys stocks, there are some Canadian semiconductor companies that we can be aware of as the industry changes.
Is there a semiconductor ETF that holds the best semiconductor stocks?
If you're looking to buy all of the top semiconductor companies around the globe at once, you're in luck. That is because there is the Horizons Global Semiconductor Index ETF trading under the ticker CHPS.
It contains some of the fastest-growing companies in the industry, including Nvidia, ASML Holdings, Broadcom, Intel, Qualcomm, and Advanced Micro Devices.
With assets under management of just over $28M it is a relatively small ETF. However, considering it just started in June 2021, it is likely to continue picking up steam.
Looking for Canadian exposure instead? Let's look at some of the top Canadian semiconductor stocks to buy
A disclosure before we begin. All of the semiconductor stocks listed below are small/micro cap companies, prone to much larger swings in price and overall risks than the major players. Although they do promise more upside, it is extremely important you understand that they pose much higher risks if you choose to invest, and they need to be monitored extensively, more so than buying long term investments like blue chip stocks.
Make sure you understand your investment objectives and risk tolerance prior to even considering these companies.
With that being said, lets get started.
What are the top semiconductor stocks in Canada?
- Spectra Microsystems (SEV.V)
- POET Technologies (PTK.V)
- Celestica (TSE:CLS)
Spectra Microsystems Inc. (SEV.V)
Though Spectra Microsystems Inc. has a smaller market cap than many of the other big players in the Canadian semiconductor industry - just $18 million - the company’s stellar performance over the course of 2021 has attracted attention from many investors. Between January 5, 2021, and January 5, 2022, the company’s stock rose by a remarkable 56 percent and at times was trading as high as $2.50 a share.
Spectra7 Microsystems Inc is a high-performance analog semiconductor company delivering unprecedented bandwidth, speed, and resolution to enable disruptive industrial design for electronics manufacturers in virtual reality, augmented reality, mixed reality, data centers, and other connectivity markets.
The company has been growing revenue at a relatively rapid pace. In fact, post pandemic the company's revenue on a trailing twelve month basis at the time of update has grown by over 100%.
Obviously, a growing revenue stream isn't the be all end all, as this company has witnessed a significant drawdown in a rising rate environment primarily due to its speculative nature and debt levels.
The company has a debt to equity ratio of over 9, and a negative interest coverage ratio. So, it's highly likely we are going to be seeing a share offering from the company.
This is by far the highest risk/highest reward company on this list, and should be invested in with extreme caution.
POET Technologies Inc. (PTK.V)
POET Technologies Inc. was originally incorporated in 1972 and is currently based in Toronto. The company is involved in many components of the optoelectronics industry, including design, development, manufacturing, selling, and distribution.
POET Technologies Inc offers integration solutions based on the POET Optical Interposer, a novel platform for the seamless integration of electronic and photonic devices into a single module using advanced wafer-level manufacturing techniques and packaging methods.
Its products have applications in Data Center, Telecommunications, Internet of Things & Industrial Sensing, Automotive LIDAR, and On-Board Optics. The bulk of the business is focused in Asia, United States, and Canada.
The company underwent a significant rise in popularity during the Coronavirus outbreak, but has since given most all of its gains back. With a market cap of only $152M, it has suffered a large scale drawdown in this risk of environment we're currently in.
The issue with POET is not in its future potential. It is with its current state. The company is pre-revenue, and as mentioned the markets are very risk off at this moment in time. The benefit for investors or potential investors in POET is the fact it doesn't carry any debt, which should shield it from higher interest rates.
This isn't as high risk of a play as something like Spectra. But make no mistake about it, pre-revenue companies trading on the venture are exposed to significant volatility.
Overall, POET’s price movements have mostly aligned with the semiconductor industry as a whole. The bullish future for cloud computing and related technologies will give POET plenty of opportunities to grow.
Celestica Inc. (TSX:CLS)
Celestica Inc. (TSE:CLS) was originally founded in 1974 and is currently headquartered in Toronto. The company is one of the largest Canadian semiconductor producers and currently boasts a market cap of about $1.86 billion.
This made Celestia Inc. one of the best recent-performing stocks within Canada’s still-growing semiconductor industry. The company currently has about 106 million shares outstanding and, contrary to most industry competitors, has a positive EPS at $0.91.
The company operates with two distinct segments—Advanced Technology Solutions (ATS) and Connectivity Cloud Services (CCS) - both of which are poised for long-term growth. Its products are also well-diversified and used across a wide range of different sectors, including aerospace, industry, energy, health, and capital equipment.
As the world was taught a lesson in terms of the global supply chain in the pandemic, demand for CLS’s products can be expected to continue to grow. Estimates have the company growing revenue in the low single digit range while earnings are expected to grow at a double digit pace.