Best Nanotechnology Stocks: These 3 Could Have a Big Year
Before jumping into the three best nanotechnology stocks to buy, there are two things to discuss. The first is a semi-brief introduction of what nanotechnology actually is. The second is the narrative behind why nanotechnology could be poised for a big year. If you’re a Ph.D. atomic scientist, please feel free to skip the following section. If not, at least skim it before jumping to the nanotechnology stocks.
What is Nanotechnology?
Nanotechnology is the technology that powers Iron Man’s suit in Avengers: Endgame. In real life, nanotechnology is defined as science, engineering and technology conducted at the nanoscale. So what is the nanoscale?
The nanoscale is a scale with a length of about 1 to 100 nanometers. A nanometer is one-billionth of a meter. For reference, here are three examples of how big a nanometer is:
- A strand of human DNA is about 2.5 nanometers in diameter.
- A strand of human hair is about 100,000 nanometers wide.
- Your fingernails grow about 1 nanometer per second.
We’re talking very, very tiny. In fact, a nanometer is so small that you can’t even see it with a traditional microscope. You need a specialized electron microscope. Nanometers are used to measure atoms and molecules, the smallest things on Earth.
What is Nanotechnology Used For?
There are countless potential uses for nanotechnology, and we’ll go over a few before getting into what the best nanotechnology stocks to buy are. Apart from Iron Man’s suit, some commonly researched areas are nanocomputers, nanorobotics and nanobiology (medicine). Nanotechnology has lots of potential uses in the medical field. For example, it could be used to treat chronic illness with better accuracy. It could also make drug delivery systems more efficient.
In addition to medicine, nanotechnology has a lot of potential for the semiconductor industry. This is especially relevant today due to the global chip shortage. The chip shortage started due to COVID-19 supply chain disruptions. Today, it’s still raging on due to lopsided supply and demand. Basically, demand for chips is surging while chip production has stayed the same.
Creating modern computer chips is not an easy process. It involves rare materials, multiple steps and highly-complicated processes. Due to this, it’s not possible for companies to simply ramp up production. To do so, they have to build entirely new factories.
Solving the global chip shortage and nanotechnology could go hand in hand. Nanotechnology could offer a better solution for creating microchips. For example, creating smaller chips would require using fewer materials. This saves money and raw materials while maximizing the performance of the chip. Creating more efficient chips is one way to help ease the shortage.
Keep in mind that this scenario is still playing out. However, the potential is there. The companies that are working to solve this problem today could be the ones worth billions down the road.
Emergen Research estimates that the global nanotechnology market will reach $290.93 billion by 2028. This is a healthy CAGR of 18.3%.
- Nanotechnology is science, engineering and technology conducted at the nanoscale.
- The nanoscale is used to measure atoms and molecules.
- Nanotechnology has tons of potential business uses. Among them, it could help with creating semiconductors.
Now, let’s take a look at the three best nanotechnology stocks to buy.
No. 3 Applied Materials (Nasdaq: AMAT)
Applied Materials is one of the leaders in solutions to create new chips and advanced displays Essentially, it provides the materials that companies need to build chips/displays for electronics. Coming off a strong year in 2021, Applied Materials is poised to be one of the best nanotechnology stocks for 2022.
Applied Materials specializes in nanomanufacturing technology, Each new generation of chips grows smaller. As such, companies require updated manufacturing systems to develop them. Applied’s solution is sought after as it allows companies to apply thin-films atom-by-atom.
Another thing to note is that Applied Materials focuses on parallel innovation. It doesn’t focus on serial innovation. Serial innovation is when a company attempts to beat out competitors by bringing new products to market. Parallel innovation is when companies collaborate to develop products. Applied Materials has chosen to collaborate with others to accelerate the delivery of chips. Doing so will likely lead to a bigger chip market. And this benefits everyone.
In 2021, Applied Materials reported record revenue, operating margin and EPS. It also ended the year with its highest backlog ever. It posted annual revenue of $23.06 billion and a net income of $5.89 billion. These numbers were up 34% and 62% respectively year-over-year (YOY). Additionally, revenue from its semiconductor business was up 43% YOY.
These strong numbers have continued into 2022. In Q1 2022, Applied materials generated revenue of $6.27 billion (up 21% YOY).
Applied’s CEO, Gary Dickerson, feels very positively about the company’s future. He recently stated, “Our outlook for 2022 and beyond is very positive as long-term secular trends drive our markets structurally higher.”
No. 2 Taiwan Semiconductor Manufacturing Co. (NYSE: TSM)
In the past, chipmakers used to make their own chips. These days, they largely focus on engineering. Foundries, on the other hand, handle the chipmaking process. As far as foundries go, Taiwan Semiconductor is one of the world’s biggest. It creates chips used for phones, gaming consoles, TVs and more. Chip demand is soaring. And many investors consider TSM one of the best nanotechnology stocks to own.
One of TSM’s biggest advantages is its relationship with Apple. TSM is one of Apple’s biggest partners with sales to Apple making up a quarter of TSM’s revenue. In fact, TSM’s chips are usually the brains behind Apple products. For example, when an iPhone’s battery life increases, it’s usually due to an enhanced TSM chip.
TSM doesn’t just sell to Apple though. This Taiwan company manufacturers around 50% of the world’s semiconductors. This dominance allows TSM to control pricing in the industry.
As mentioned, foundries cannot simply pull a lever to increase chip supply. The process is too complicated. To solve this problem, TSM is building an entirely new factory. This is what will allow it to scale its chip production. TSM has chosen to construct this new $12 billion mega-facility in Arizona.
Taiwan Semiconductor reported FY 2021 annual revenue of TWD $1.59 trillion. It also posted a net income of TWD 596 trillion. These numbers were up 18% and 15% respectively YOY.
Best Nanotechnology Stocks No. 1 Thermo Fisher Scientific (NYSE: TMO)
Thermo Fisher Scientific is one of the leading providers of scientific instrumentation. It doesn’t necessarily create semiconductors. Instead, it develops electron microscopes. Thermo Fisher’s solutions are capable of zooming in on a single atom. This is part of the reason that Thermo Fisher is one of the best nanotechnology stocks to buy. As the demand for semiconductors rises, so should the need for equipment to build them.
Thermo Fisher’s microscopes help scientists develop nanotechnology and package nanodevices. Right now, the company has two main products relevant to semiconductors. The first is the Orbitrap Exploris Gas Mass Spectrometer. The second is the Helios 5 EXL DualBeam microscope. Both of the products aid in creating smaller, more complex semiconductors. If current trends continue, look out for sales of these instruments to spike accordingly.
Thermo Fisher reported FY 2021 annual revenue of $39.2 billion. It also posted a net income of $7.73 billion. These numbers were both up 21% YOY.
I hope that you’ve found this article valuable for learning about the best nanotechnology stocks to invest in! Please note that I’m not a financial advisor and am just offering my own research and commentary. Please base all investment decisions on your own due diligence.