The largest tech companies in the U.S make up a huge portion of the entire NASDAQ composite index.
The TSX doesn’t lean as heavily on tech, and the whole tech sector makes up a bit more than one-tenth of the Canadian market. And that’s mostly thanks to Shopify emerging as a heavyweight.
Still, the Canadian markets do have a fair selection of tech companies, and a fair number of them fall under the semiconductor category.
It’s an avenue worth exploring as it behaves differently compared to software-oriented tech stocks. And with a breakthrough, many of the best Canadian semiconductor stocks could turn out to be great investments.
What Are Semiconductor Stocks?
Thanks to their electrical properties, semiconductor materials act somewhere between a conductor and an insulator. They offer more control over the flow of electricity, thus making them ideal for control-related circuitry.
Their contribution to the world is quite profound. If it weren’t for semiconductors, we wouldn’t have computers and smartphones, at least not in the same compact state as we have today.
The semiconductor stocks can include companies from three sectors: Metal and mining, chemical, and tech. That is if we cover the entire lifecycle of semiconductor materials from extraction to final products.
However, the general consensus is that semiconductor stocks represent companies that create microchips and integrated circuits (ICs).
Best Canadian Semiconductor Stocks
There are several companies that fall neatly under the definition of semiconductor stocks currently trading in Canada.
Most of them are micro and nano-cap and trade-in venture capital rather than the main market.
Unless otherwise specified, all the stocks below are listed in the venture capital market.
1. POET Technologies Stock
POET Technologies has a very specific semiconductor business: Combining electronic functionality and photonics in a single microchip.
That allows these chips to partly communicate using light, which doesn’t get affected by temperature, something a typical semiconductor-based IC is susceptible to.
The company has design, wafer-scale fabrication, and assembly capabilities, making it one of the few Canadian semiconductor companies that actually make microchips, though they are made overseas.
The company made great strides regarding its product development in 2021, and it’s still a few years away from true market penetration.
The semiconductor technology that POET offers may find great and currently untapped applications.
2. Metamaterial Stock (CNSX)
Metal material stock is a bit of a cheat on this list, as it doesn’t focus as much on semiconductors as it does on something called Metamaterials, which literally means “beyond materials.”
The premise is that the company creates materials that offer properties that grow beyond what natural materials can offer. It also focuses on nanotech.
And while neither are technically semiconductors, the company has more in common with semiconductor tech companies than most others.
The company is quite old, but the stock is relatively young. It only joined the market in 2020.
3. 5N Plus Inc. Stock (TSX)
5N Plus offers a variety of material solutions, including metals, chemicals, and semiconductors.
In the semiconductor category/product line, the company has three semiconductor compounds and two different types of wafers in its semiconductor portfolio “portfolio.”
So it’s not a pure semiconductor company but has a significant overlap with the sub-industry.
Thanks to its diversified product/solution focus, the company caters to a wide variety of industries, including pharmaceutical and R&D.
4. Spectra7 Microsystems Stock
Spectra7 is all about making electronics even smaller and more efficient than they are by replacing the bulk and weight of traditional circuits/chips with its analog chip technology.
The company offers a variety of semiconductor/electronic material-related solutions, many of them highly relevant now and will likely get even more spotlight in the future.
The solutions include Augment Reality and virtual reality hardware and its trademarked 5K resolution headsets.
5. NexOptic Technology Stock
NexOptic has two products: One overlaps with semiconductors from the software side while the other on the hardware side.
Its Aliis solution is a pack/system of artificial intelligence (AIs) that can be integrated into microchips directly for real-world data processing and enhancement.
The company already partners with Nvidia and ARM (microprocessors and controllers). The other product uses a powerful processor and NexOptic’s proprietary technology for long-range optics.
6. Ynvisible Interactive Stock
Imagine reading something on a piece of paper, and the words suddenly change, and you read something else.
It’s not at all unusual on a screen, but on an article or something that looks like paper, it can be quite incredible. There is something called e-paper which, using very little electricity, tiny ink pellets, and electrodes, can display specific messages on paper-like circuits.
The e-papers are significantly cheaper, though less versatile than screens, and might offer a wide variety of ingenious uses.
7. Quantum eMotion Stock
Even in this list of relatively unique companies, this nano-cap company stands out from the crowd.
The Quantum eMotion creates QNG2, a patented technology the size of a small IC that can be installed in most electronic devices like cell phones and computers.
It’s basically a quantum random number generator, which can be used for the next generation encryption, which even quantum devices/computers will not be able to break.
Note that it’s one of many similar devices available in the world, but it’s one of the smallest and the most power-efficient devices of its kind.
Solar Stocks in Canada
It’s important to note that the TMX screener, which can be considered the purest of all screeners since it’s offered by the same company that is responsible for running the TSX, lists a few other nano-caps as semiconductor stocks as well: Enerdynamic Hybrid Technologies, UGE International, and Solar Alliance Energy, among others.
They are all solar panel companies. But I didn’t add them to the list above because the companies don’t create solar panels/solar cells, which would make them semiconductor companies indeed. They just design and deploy solar energy solutions.
US-Based Semiconductor Stocks
The US is home to some of the largest, most revered semiconductor companies in the world.
Unless otherwise specified, the companies trade on NASDAQ.
8. Nvidia Stock
- Ticker: NVDA
- Technology: Graphics Processing Unit
- Forward Dividend Yield: 0.08%
- Dividend Payout Ratio: 4.29%
- Dividend Yield (12-Month Trailing): 0.08%
- Upcoming Dividend Date: Dec 22, 2022
- Market Cap: $507.50 Billion
- Forward P/E Ratio: 47.36
- Average Analyst Rating: 2.2 - Buy
Nvidia is currently the largest Graphics Manufacturing Unit or GPU manufacturer in the world by market cap.
It has almost always been a decent-sized company and the most well-known name in the gaming industry, but it really took off in the last few years, thanks to its GPUs being used in crypto mining since they are significantly more efficient compared to CPUs.
And while the company has been turning in a neat profit selling GPUs to crypto miners, gamers remain its primary market.
9. Broadcom Stock
- Ticker: AVGO
- Technology: Broad-spectrum semiconductor solution provider
- Forward Dividend Yield: 2.97%
- Dividend Payout Ratio: 76.28%
- Dividend Yield (12-Month Trailing): 2.82%
- Upcoming Dividend Date: Dec 30, 2022
- Market Cap: $246.97 Billion
- Forward P/E Ratio: 13.62
- Average Analyst Rating: 1.8 - Buy
Broadcom is aptly named if we consider its business model. It offers a wide range of semiconductor products and solutions to several different markets. It makes storage systems, wired and wireless devices, optical products, etc.
The company has been around since 1961 and has risen to become one of the largest semiconductor companies in the world.
Semiconductor manufacturing and final product development is its forte and roots, but the company has expanded into the software business as well, particularly mainframe and enterprise software.
10. Intel Stock
- Ticker: INTC
- Technology: Microprocessors
- Forward Dividend Yield: 4.13%
- Dividend Payout Ratio: 30.58%
- Dividend Yield (12-Month Trailing): 4.85%
- Upcoming Dividend Date: Mar 01, 2023
- Market Cap: $116.50 Billion
- Forward P/E Ratio: 11.31
- Average Analyst Rating: 3.3 - Hold
Intel is one of the largest, if not the largest, microprocessor companies in the world. Its processors power billions of devices around the globe and will continue to do so.
The processors created by Intel dominate the personal computer realm. But despite its competitive edge and is the most recognized name in its particular market segment, the stock might not offer the same level of growth many other semiconductor stocks on this list can offer.
11. Texas Instruments Stock
- Ticker: TXN
- Technology: Semiconductor and IC manufacturing
- Forward Dividend Yield: 2.50%
- Dividend Payout Ratio: 48.91%
- Dividend Yield (12-Month Trailing): 2.69%
- Upcoming Dividend Date: Feb 14, 2023
- Market Cap: $158.77 Billion
- Forward P/E Ratio: 20.5
- Average Analyst Rating: 2.7 - Hold
Texas Instruments is a well-known name in the field of electronics. It has a massive product range that includes numerous sensors, amplifiers, data converters, and several other product categories.
It has been serving its international customer base for over nine decades and has a massive presence in multiple markets. The stock can achieve substantial long-term growth, but not if you buy it at or near its peak.
The bulk of the revenue comes from the analog devices/sensors it manufactures, while the next largest portion comes from its embedded instruments/technologies (semiconductors).
12. Advanced Micro Devices
AMD can be considered a powerful mix of both Intel and Nvidia. The company creates CPUs, and though they don’t have nearly enough penetration in the global market as the Intel ones, they are making waves.
AMD’s newer processors have beaten Intel processors on multiple performance benchmarks and are gaining widespread attention. The case is the same with GPUs.
AMD makes relatively affordable GPUs compared to Nvidia, but they are also becoming increasingly more powerful, and the company is stealing away a decent amount of market share from Nvidia.
Who Makes Microchips In Canada?
There are three companies: Poet Technologies, Spectra7 Microsystems, and Ynvisible Interactive that technically create microchips, but not all three pick up the manufacturing process from scratch.
Are Semiconductor Stocks Good Investments?
Yes. They can often run contrary to the broader tech market and the stock market as a whole.
The contrarian nature can help you beat the market. But they are a good investment because of the rising demand for semiconductors and consumer electronics.
Over a billion smartphones are sold every year, and it’s a number that’s only going to rise over time.
And with IoT, the demand for ICs, microchips, and other semiconductor-based products is expected to spike, making semiconductor stocks a relatively smart investment.
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Despite being volatile, relatively risky, and micro and nano-cap, Canadian semiconductor stocks offer much more powerful growth potential than their mature, US counterparts.
Many of them rely upon technological breakthroughs, and if those breakthroughs occur, the stocks can soar to unprecedented heights. So even if you are not keen on buying them now, tracking them will likely be a smart idea.
While semiconductor-based electronics don’t require too much power, it would still be a good idea for you to invest in green utilities.