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

SkyWater Technology SKYT and Semtech Corporation SMTC are well-known players in the fast-growing semiconductor market. While SkyWater runs a domestic foundry serving the defense and advanced packaging space, Semtech designs analog and Internet of Things (IoT) chips used in data centers, industrial systems and smart devices. As the United States ramps up investments to bring more chip production home, both companies are well-positioned to benefit from this shift.

According to the latest projections from the World Semiconductor Trade Statistics organization endorsed by the Semiconductor Industry Association, semiconductor sales are expected to grow 11.2% year over year to $700.9 billion in 2025 and will hit $760.7 billion in 2026. The growth is being driven by rising demand for AI hardware, electric vehicles, industrial automation and edge computing. This opens up long-term opportunities for both SkyWater and Semtech.

However, SKYT or SMTC, which has an edge right now?  Let's delve deep to find out.

The Case for SKYT

SkyWater is building momentum through product innovation, customer ramp-ups and expanded manufacturing scale. The company’s ThermaView platform is driving adoption across thermal imaging and diagnostics. SkyWater’s model of moving customer programs from early development to production is helping grow the Wafer Services segment with deeper customer alignment.

SkyWater holds a unique position as America's only DMEA-accredited Category 1A trusted foundry. This provides strategic advantages in securing government contracts. SKYT reported first-quarter 2025 revenues of $61.3 million with gross margin reaching 24.2%. Strong Wafer Services contributions from new product ramps supported these results. Advanced computing now represents 10% of total revenues. Quantum computing partnerships with D-Wave and Si-Quantum are expanding the company's technological footprint significantly.

The completed acquisition of Infineon's Fab 25 in Austin is expected to transform SkyWater's scale and capabilities. The transaction, which closed on June 30, 2025, for $73 million plus working capital, is set to add approximately 400,000 wafer starts per year. This makes SkyWater the largest exclusively U.S.-based, pure-play foundry service provider. Fab 25 expands capacity across sectors like EVs, aerospace and medical devices while helping address prior scale limitations.

The Case for SMTC

Semtech Corporation is gaining momentum in next-gen data center infrastructure, driven by strong product demand, platform innovation and deeper hyperscaler engagement. The company reported record data center revenue of $51.6 million in the first quarter of fiscal 2026, up 3% sequentially and 143% year over year. Growth was led by continued strength across its CopperEdge and FiberEdge portfolios, with CopperEdge serving as the primary driver.

The CopperEdge product line delivers more than 90% power savings and longer reach versus traditional cables. In April 2025, Semtech launched three new linear equalizer ICs, GN8214, GN8224 and GN8234, designed to support 800G and 1.6T connectivity in high-density AI/ML data centers. These solutions are engineered for long-reach signal integrity and energy efficiency at scale.

Semtech continues to deepen its collaboration with major cloud platforms and cable manufacturers, helping position its technologies at the core of next-generation compute infrastructure. The Catalina platform, which uses CopperEdge-enabled Active Copper Cables, is being adopted by hyperscalers including Meta to power their AI architectures.

As AI workloads scale and bandwidth demands increase, Semtech’s low-power interconnect portfolio and established partnerships offer strong tailwinds. With new product launches gaining traction and record data center revenue reinforcing execution, Semtech appears well-positioned to deliver continued growth across AI-centric infrastructure in the quarters ahead.

Price Performance and Valuation of SKYT and SMTC

Shares of Skywater and Semtec have plunged 25.8% and 21.3% year to date, respectively. The dip in SKYT and SMTC share prices can be attributed to the challenging macroeconomic environment. A broader market weakness in the tech sector and persistent fear over mounting tariffs have added to the pressure.

SKYT and SMTC Performance

Valuation-wise, SMTC shares are currently overvalued, as suggested by a Value Score of D. SKYT currently holds a Value Score of B.

In terms of forward 12-month Price/Sales, SMTC shares are trading at 3.87X, higher than SKYT's 1.43X.

SKYT and SMTC Valuation

How Do Earnings Estimates Compare for SKYT & SMTC?

The Zacks Consensus Estimate for SKYT's 2025 loss is pegged at a penny per share, unchanged over the past 30 days. The figure indicates a decline from last year’s profit of 6 cents per share.

SkyWater Technology, Inc. Price and Consensus

SkyWater Technology, Inc. price-consensus-chart | SkyWater Technology, Inc. Quote

The Zacks Consensus Estimate for SMTC's fiscal 2026 earnings is pegged at $1.66 per share, unchanged over the past 30 days. This indicates an 88.64% increase year over year.

Semtech Corporation Price and Consensus

Semtech Corporation price-consensus-chart | Semtech Corporation Quote

Conclusion

Both SkyWater and Semtech are positioned to benefit from long-term growth trends in the semiconductor market, supported by rising demand for AI infrastructure, secure domestic manufacturing and next-generation connectivity. SkyWater’s unique foundry status and the addition of Fab 25 enhance its role in the U.S. reshoring effort, with growing traction across defense and quantum computing platforms.

Semtech offers stronger near-term visibility, supported by record data center performance, expanding CopperEdge product adoption and increased engagement with hyperscale cloud providers. Its low-power, high-speed interconnect solutions align closely with AI-driven infrastructure requirements.

Currently, SMTC carries a Zacks Rank #2 (Buy), making it the stronger pick over SKYT, which holds a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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