We recently published a list of analysts' top 10 best affordable tech stocks to buy, and in this article we'll look at how Silicon Motion Technology Corporation (NASDAQ:SIMO) stacks up against other affordable tech stocks.
No doubt, technology continues to change rapidly. In a technology-rich world, investors and analysts have plenty of options. As we all know, Artificial Intelligence (AI) has been at the forefront of the conversation for the past few years.
US stocks have recovered slightly from recent lows as economic data has given confidence in the health of the US economy. The Technology Select Sector SPDR Fund has gained around 19% or more year-to-date. Much of this rally in the IT sector has been driven by optimism about AI technology. However, some hints of interest rate cuts have also supported the overall rally.
The latest data puts the global AI market at $196.63 billion (estimated by Grand View Research), representing an increase of approximately $60 billion from 2022 onwards. This growth is driven by the increasing number of practical applications of AI technology, from content creation to self-driving cars.
The growth of artificial intelligence (AI) and extended reality (XR)
AI should continue to advance rapidly, with a focus on areas such as natural language processing, computer vision, and generative AI. PWC reports that by 2030, approximately 45% of total economic benefits will come from product enhancements, driving consumer demand. AI is expected to deliver more personalized, engaging, and affordable products, and increase product diversity. The largest economic benefits from AI are expected to come from China (26% increase in GDP in 2030) and North America (14.5% increase). This equates to $10.7 trillion, accounting for approximately 70% of the global economic impact.
Extended Reality (XR), known as the fusion of Virtual Reality (VR), Augmented Reality (AR), and Mixed Reality (MR), is expected to create immersive experiences across industries, primarily in the gaming and entertainment sector. Rising usage of smartphones, growing adoption of smart electronic devices, and introduction of 5G technology are expected to be the major growth drivers for the North American augmented reality market.
In particular, media companies have been exploring the potential of using XR technology as a storytelling and advertising medium for many years, and the interactive advertising campaigns and product visualization components of XR should drive growth in the advertising industry.
Cybersecurity Technology – Need and Emergence
The cybersecurity technology market is projected to reach USD 190.4 billion in 2023 and is expected to reach USD 298.5 billion by 2028 (according to Markets and Markets data), which represents a CAGR of approximately 9.4%. This healthy growth is expected to be driven by the increasing sophistication of cyber threats, the expanding digital landscape, and the urgent need for data protection. Hence, cybersecurity solutions such as data encryption, firewalls, and antivirus software are being used to protect and transmit data.
The story continues
Technologies such as AI, machine learning (ML), and automation are widely used in cybersecurity technologies to improve threat detection and predictive analytics. The growing demand for industrial robots and increasing adoption of managed security services should create new opportunities in the market. Robot cybersecurity solutions are also trending towards protecting endpoints, and connectivity stacks help prevent data breaches and asset downtime.
Robotics Trends
With the introduction of digitalization and the Industry 4.0 revolution, robotic automation has become widely accepted across industries, resulting in dramatic changes to traditional production and operational procedures. Industry 4.0 develops smart factories where machines can collaborate with human workers and other machines in real time. This is done using cloud computing, IoT, and cyber-physical systems.
The emergence of numerous technologies focused on production management and the introduction of automation solutions remain key elements of the current productivity enhancement policy. Apart from this, industrial robots are becoming more widely known and are being implemented across the manufacturing and healthcare industries. Moreover, the demand is primarily driven by the rising labor costs, prompting manufacturers to replace human labor with machines. In particular, Asia and Europe are being eyed as major growth regions in the world.
The growth of smart factories or smart manufacturing is expected to emerge from rapid digitization and rising demand for industrial automation across various industries. Another factor expected to support its growth over the next few years is the widespread use of Manufacturing Execution Systems (MES) and advanced data models for process-specific operations. The market for smart factories continues to gain momentum due to the increasing use of refurbished industrial robots and radio frequency identification (RFID) systems.
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Is Silicon Motion Technology Corporation (SIMO) the best affordable tech stock to buy, according to analysts?
An engineer in a white coat is adjusting a circuit board containing complex semiconductors.
Silicon Motion Technology Corporation (NASDAQ:SIMO)
Estimated PER as of August 23: 18.21x
Potential for upside: 40.47%
Estimated EPS growth this year: 53.3%
Silicon Motion Technology Corporation (NASDAQ:SIMO) is active in the semiconductor industry and is focused on the design, development, and marketing of controllers that manage NAND Flash used in embedded storage applications such as eMMC embedded memory. The company offers InstantView™ docking technology, which allows users to mirror the screen of any laptop, Chromebook, or Android smartphone without downloading any drivers.
The company appears well positioned to benefit from the increasing integration of electronics and semiconductors across network communications devices. Going forward, the company's diverse portfolio and technology leadership should help drive revenue growth. Additionally, the company plans to launch several new products, including its enterprise-class MonTitan family, as well as new PCIe 5.0 and UFS 4.0 controllers.
Silicon Motion Technology Corporation (NASDAQ:SIMO) should benefit from stable PC demand and growth in the smartphone market, as well as rising NAND prices driven by demand from datacenter and enterprise storage applications. Investments in research and development for next-generation controllers could increase average selling prices and market share.
Susquehanna increased their target price on shares of Silicon Motion Technology Corporation (NASDAQ:SIMO) from $100.00 to $110.00. The brokerage gave the stock a “positive” rating on May 6. According to Insider Monkey's Q2 2024 database, 43 hedge funds were long Silicon Motion Technology Corporation (NASDAQ:SIMO).
Investment management firm Ave Maria recently released its investor letter for Q1 2024 and mentioned Silicon Motion Technology Corporation (NASDAQ:SIMO). Here is what the fund said:
“Silicon Motion Technology Corporation (NASDAQ:SIMO) is a fabless semiconductor company specializing in low-end flash memory controllers. Memory manufacturers often design their own controllers, but rising chip development costs have made it increasingly advantageous for them to outsource the development of more commoditized low-end controllers to third parties like Silicon Motion. This outsourcing trend is shifting from consumer applications to the server-end market. Silicon Motion's new enterprise controllers are well positioned to capitalize on this growth.”
Overall, SIMO ranks third on the list of most affordable tech stocks to buy, according to analysts. While we acknowledge SIMO's potential as an investment, we believe some undervalued AI stocks have a better chance of delivering higher returns in a shorter time frame. If you're looking for undervalued AI stocks that are more promising than SIMO but still trade for less than five times earnings, check out our report on the cheapest AI stocks.
Read next: The $30 Trillion Opportunity: The 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and NVIDIA Has “Become a Wasteland” According to Jim Cramer.
Disclosures: None. This article was originally published on Insider Monkey.
