SkyWater vs. Semtech: Which Semiconductor Stock is the Better Buy?

Core Insights - SkyWater Technology (SKYT) and Semtech Corporation (SMTC) are positioned to benefit from the growing semiconductor market, particularly as the U.S. increases domestic chip production [1][2] - Semiconductor sales are projected to grow 11.2% year over year, reaching $700.9 billion in 2025 and $760.7 billion in 2026, driven by demand for AI hardware, electric vehicles, and industrial automation [2] SkyWater Technology (SKYT) - SkyWater is enhancing its market position through product innovation and expanded manufacturing capabilities, with a focus on its ThermaView platform for thermal imaging [4] - The company reported Q1 2025 revenues of $61.3 million and a gross margin of 24.2%, with advanced computing now accounting for 10% of total revenues [5] - The acquisition of Infineon's Fab 25 is expected to significantly increase SkyWater's capacity, adding approximately 400,000 wafer starts per year and making it the largest U.S.-based pure-play foundry service provider [6] Semtech Corporation (SMTC) - Semtech is experiencing growth in next-gen data center infrastructure, reporting record data center revenue of $51.6 million in Q1 fiscal 2026, a 143% increase year over year [7] - The CopperEdge product line offers over 90% power savings and is designed for high-density AI/ML data centers, with new ICs launched to support advanced connectivity [8] - Semtech's collaboration with major cloud platforms positions its technologies at the core of next-generation compute infrastructure, enhancing its growth potential in AI-centric markets [9][10] Market Performance and Valuation - Both SKYT and SMTC shares have declined year-to-date, with drops of 25.8% and 21.3% respectively, attributed to a challenging macroeconomic environment [11] - SMTC shares are currently overvalued with a Value Score of D, while SKYT holds a Value Score of B; SMTC's Price/Sales ratio is 3.87X compared to SKYT's 1.43X [13] - Earnings estimates indicate a projected loss of one cent per share for SKYT in 2025, while SMTC's earnings for fiscal 2026 are estimated at $1.66 per share, reflecting an 88.64% year-over-year increase [16] Conclusion - Both companies are well-positioned to capitalize on long-term growth trends in the semiconductor market, with SkyWater benefiting from its unique foundry status and Semtech showing stronger near-term visibility due to record data center performance [17][18]