Nvidia pulls further away from other chip makers by this one measure

In the middle of October we published a list of semiconductor companies expected to show the highest compound annual growth rates for sales from 2023 through 2025. With third-quarter earnings season now behind us, it is time to take another look and incorporate analysts’ latest estimate updates.

Nvidia Corp.
NVDA
has provided a stark example, explained below, of how estimates can change quickly and surprise investors, even during a year in which the company has pretty much created a new industry as the dominant seller of graphics processing units being installed by data centers to support their corporate clients’ deployment of artificial-intelligence technology.

Screening semiconductor companies

To screen U.S.-listed stocks of semiconductor manufacturers and companies that provide support to them, we began with the 30 companies held by the iShares Semiconductor exchange-traded fund
,
which tracks the PHLX Semiconductor Index
.
Then we added the 30 additional companies in the S&P Composite 1500 Index

that are in the semiconductor industry, as determined by FactSet, or in the Semiconductors and Semiconductor Equipment Global Industry Classification Standard group. The S&P Composite 1500 is made up of the S&P 500
,
the S&P 400 Mid Cap Index

and the S&P Small Cap 600 Index
.

Companies’ fiscal years can vary, so we used consensus estimates among analysts polled by FactSet for sales and earnings for calendar years 2023 through 2025.

Nvidia tops the list for expected compound annual growth rate for sales from 2023 through 2025. Here is how the estimates have changed since Oct. 18. Sales figures are in millions.

An increase in Nvidia’s expected two-year sales CAGR to 38.1% from 35.2% may not seem significant at first. But for context, the expected two-year sales CAGR for the S&P 500 through 2025, based on current weighted aggregate estimates, is 5.2%. For the S&P 500 information-technology sector, it is 9.1%. And for the SOXX group of 30 semiconductor companies, it is 10.5%.

With Nvidia enjoying high profit margins, its earnings-per-share estimates have risen even more quickly:

For more about how analysts reacted after Nvidia reported its latest quarterly results on Nov. 21, see Emily Bary’s coverage of the company in the Ratings Game column.

New sales-growth screen for the industry group

Getting back to our list of 60 semiconductor companies, sales and earnings estimates are available through 2025 for 55 of them. Here are the 20 expected to show the highest sales CAGR from calendar 2023 through 2025. Estimates are in millions of U.S. dollars.

Click on the tickers for more about each company.

Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

There are three non-U.S. companies on the list. Two are based in Taiwan, with tickers for their American depositary receipts on the list — Taiwan Semiconductor Manufacturing Co.
TSM
and United Microelectronics Corp.
UMC.
The third is Fabrinet
FN,
which is based in the Cayman Islands and is directly listed on the New York Stock Exchange.

Among the top 10 expected sales growers on the list, Nvidia has had the largest increases in consensus sales estimates since Oct. 18, while Micron Technology Inc.’s
MU
estimate for 2023 has risen slightly and its 2025 estimate has declined slightly. Estimates for 2023 and 2025 for the rest of the top 10 all declined slightly except for TSMC, whose estimates for both those years rose by 1%.

Read: Micron’s stock might be an excellent play for AI investors who want to diversify beyond Nvidia

Expectations for profit growth

Leaving the list of 20 in the same order, here are current projections for earnings-per-share CAGR from 2023 through 2025:

Comparing expected growth rates for EPS makes for a less orderly set of numbers than a similar comparison of sales estimates. This is because current-year earnings can be grossly affected by one-time events. But in general, the EPS growth rates will be higher, or will swing from net losses to profits, because of the scaling of these business. Profit margins expand as sales increase.

Analysts’ ratings and price targets

Here is a summary of analysts’ ratings and consensus price targets for the group. Click the tickers for forward price-to-earnings ratios. When factoring in the expected growth rates, Nvidia appears to be a cheap stock based on forward P/E.

Don’t miss: Here’s why Nvidia is a compelling stock when compared with the rest of the ‘Magnificent Seven’