The semiconductor industry is evolving rapidly, driven by growing demand for artificial intelligence (AI) chips essential to powering advanced technologies. Often referred to as the “new oil,” semiconductors are indispensable for modern devices and key industries like automotive, defense, and healthcare.
But why are semiconductors so crucial? These tiny chips power everything from household appliances to cutting-edge systems. Their real significance lies in enabling emerging technologies like artificial intelligence and 5G. Nations worldwide are competing to lead in this vital sector, with India making bold strides to challenge established players like Taiwan and South Korea.
As AI continues to be integrated into technologies such as self-driving cars, smart devices, and robotics, the demand for high-performance chips is skyrocketing.
In this article, we explore five semiconductor stocks that could benefit from the booming AI chip market.
Team findesh/JAN 05, 2025
1. HCL Technologies Ltd.
HCL Technologies is a leading global IT services firm, excelling in transformational outsourcing with a comprehensive portfolio of software-led IT solutions, infrastructure management, engineering, R&D services, and BPO. HCL Tech is at the forefront of securing orders in growth segments like semiconductor design and AI.
For instance, a U.S.-based financial services firm recently partnered with HCL to modernize data insights for risk management, including fraud analytics and anti-money laundering. Similarly, a Europe-based semiconductor major selected HCL for chip engineering services, including all phases of design, quality checks, and performance analysis.
Additionally, HCL achieved significant wins in GenAI-related programs. For example, a European semiconductor firm partnered with HCL to develop efficient IoT microcontrollers. Financially, HCL’s Q2FY25 revenue stood at ₹285.9 billion, with an operating profit of ₹63.7 billion.
Notably, HCL collaborated with AWS and Google Cloud to drive GenAI adoption, showcasing its strategic focus on AI.
2. Bharat Electronics Ltd.
Bharat Electronics Ltd. (BEL), an Indian state-owned company, leads in defense electronics, producing radar, communication, and electronic warfare systems.
The company has diversified into civilian applications through MoUs with organizations like AAI, Delhi Metro, and IISc. In FY24, BEL launched 40 new products and saw a 15% revenue growth in Q2FY25, driven by strong order books worth ₹750 billion.
Looking ahead, BEL expects order acquisitions of ₹250 billion in FY25, along with 15-17% revenue growth across defense and non-defense sectors.
3. CG Power & Industrial Solutions Ltd.
CG Power, also known as Crompton Greaves Power, specializes in energy-efficient solutions for utilities, industries, and consumers.
Recently, the company formed a joint venture with Renesas Electronics and Stars Microelectronics to establish an OSAT facility in India capable of producing 15 million chips daily.
In Q2FY25, CG Power reported revenue of ₹24.1 billion, up 20.5% YoY, with a 13% operating profit margin. The company plans to boost its export revenue share from 10% to 20% within five years, leveraging government capex in transmission to drive growth.
4. Kaynes Technology India Ltd.
Kaynes Technology India is an integrated electronics manufacturer providing end-to-end solutions across sectors like automotive, defense, and healthcare.
Its subsidiary, Kaynes Semicon, recently received approval to establish a ₹33 billion semiconductor unit in Gujarat.
Kaynes reported a Q2FY25 revenue of ₹4.3 billion, up 48.5% YoY, with net profits rising to ₹630 million. The company is expanding its printed circuit board assembly business to capitalize on growing semiconductor demand.
5. Tata Elxsi
Tata Elxsi is a global leader in design and technology services, catering to industries like automotive, media, and healthcare.
The company is focused on AI readiness, targeting 25% of its workforce to be AI-trained by December 2024. It is also partnering with semiconductor companies to create solutions that enhance chip functionality.
In Q2FY25, Tata Elxsi’s revenue stood at ₹9.5 billion, growing 8.3% YoY. Despite flat operating profit growth, the company remains optimistic about future growth.