3 Electronics Stocks Set to Benefit From a Thriving Industry

The Zacks Electronics – Miscellaneous Products industry players like Kla KLAC, Teradyne TER, and Garmin GRMN are benefiting from higher spending on artificial intelligence (AI) infrastructure, data center, and cloud computing. Growing demand for advanced packaging and semiconductor testing bodes well for industry participants. Continuing investments in data centers, high-performance computing and 5G end markets are the key catalysts. Fab (foundry) expansion in the United States, South Korea, Taiwan and China, as well as higher spending on memory equipment, is expected to drive growth in 2026 and beyond. However, the industry has been suffering from challenging macroeconomic conditions due to higher tariffs and trade restrictions. The global economic turmoil is expected to keep the semiconductor capex in check, which does not bode well for industry participants in the near term.

Industry Description

The Zacks Electronics – Miscellaneous Products industry includes a number of original equipment manufacturers of power products, drivetrains, green energy solutions, remote-control systems, GPS navigation, home automation systems, healthcare devices, industry/factory automation, robotics, semiconductor and optical applications and energy management solutions. The industry is evolving on digital transformation and the growing demand for silicon across multiple markets. The increasing cost of manufacturing bodes well for equipment suppliers, while the growing demand for silicon is positive for semiconductor companies. Apart from the United States, companies in this industry are based in Japan, Germany, the Netherlands and Switzerland. These companies either have manufacturing operations in China and Southeast Asia or generate significant revenues from these regions.

3 Trends Shaping the Future of the Industry

Solid Capital Spending Drives Prospects: Ongoing technology transition due to rapid deployment of AI is driving product complexities, which is raising the demand for solutions provided by industry participants. More complex designs, accelerating product cycles and high-value wafer volumes are growing the demand for advanced packaging. Increasing investment in expanding manufacturing capacity by semiconductor companies is a key catalyst in the long run. Since semiconductor companies are major customers of miscellaneous electronics product manufacturers, the trend bodes well for industry participants. In addition, rising spending on advanced nodes — 7 nm, 5 nm and 3 nm processes from logic and foundry customers — favors industry participants. Logic and foundry spending is anticipated to be healthy this year.

Strong Demand for AI, Data Center and Cloud Computing Solutions: Industry participants are riding on strong demand for AI infrastructure, data center and cloud computing solutions. Wearables and AR and VR-supported display systems in defense, industrial, consumer applications and healthcare end markets are another prospect.

Challenging Macroeconomic Conditions Acts as Headwind: Industry participants are suffering from challenging macroeconomic conditions globally, with enterprises in automotive, industrial and energy end-markets showing reluctance in committing to multi-year deals. Higher tariffs and persistent inflation do not bode well for industry participants.

Zacks Industry Rank

The Zacks Electronics – Miscellaneous Products industry is housed within the broader Zacks Computer and Technology sector. It carries a Zacks Industry Rank #26, which places it in the top 11% of more than 250 Zacks industries.

The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all member stocks, indicates bullish near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.

The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of the positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are optimistic about this group’s earnings growth potential. Since Sept. 30, 2025, earnings estimates for the industry for the current year have moved north by 15.1%.

Given the bullish prospects, there are many stocks worth buying in the industry. But before we present those stocks, let us take a look at the industry’s recent stock-market performance and valuation picture.

Industry Beats S&P 500, Broader Sector

The Zacks Electronics – Miscellaneous Products industry has outperformed the S&P 500 and the broader Zacks Computer and Technology sector in the past year.

The industry has appreciated 52.1% during this period against the S&P 500 composite’s return of 24.2% and the broader sector’s appreciation of 35.3%.

One-Year Price Performance

Industry's Current Valuation

On the basis of the forward 12-month P/E, which is a commonly used multiple for valuing Electronics-Miscellaneous products companies, we see that the industry is currently trading at 26.06X compared with the S&P 500’s 21.95X and the sector’s forward-12-month P/E of 24.72X.

Over the last five years, the industry has traded as high as 24.7X and as low as 19.58X, with the median being 22.98X, as the charts below show.

Forward 12-Month Price-to-Earnings (P/E) Ratio

3 Stocks to Buy Right Now

Garmin: This Zacks Rank #1 (Strong Buy) company’s shares have appreciated 12.7% in a year. You can see the complete list of today’s Zacks #1 Rank stocks here.

The company is benefiting from strong momentum across the Fitness and Auto OEM segments. While strength in the Fitness segment is primarily attributed to advanced wearables demand, Auto OEM revenues are driven by increased shipments of domain controllers. Strong momentum across the Aviation, Marine and Outdoor segments is an upside.

The Zacks Consensus Estimate for Garmin’s 2026 earnings has increased 7.2% over the past 30 days to $9.40 per share.

Price and Consensus: GRMN

Teradyne: Another Zacks Rank #1 stock, Teradyne, is benefiting from strong AI-related demand that is driving up huge investments in cloud AI build-out as customers accelerate production of a wide range of AI accelerators, networking, memory and power devices. AI compute is witnessing rapid technological progress, which is bringing rapid transformation to design, process and packaging technologies for AI compute. This trend bodes well for Teradyne’s long-term prospects.

The Zacks Consensus Estimate for Teradyne’s 2026 earnings has increased by a nickel to $5.91 per share over the past 30 days. Teradyne shares have appreciated 253.9% in the trailing 12-month period.

Price and Consensus: TER

KLA: This Zacks Rank #2 (Buy) company is benefiting from strong demand for leading-edge logic, high-bandwidth memory (HBM) and advanced packaging, which is driving market share growth in the semiconductor industry. Accelerating investment in AI infrastructure bodes well for KLA’s prospects. KLA’s robust portfolio and its leadership in process control systems are enabling customers to manage increasing design complexity.

KLAC shares have surged 114.9% in a year. The consensus mark for KLA’s fiscal 2026 earnings has increased by a nickel to $36.63 per share over the past 30 days.

Price and Consensus: KLAC

Zacks Names #1 Semiconductor Stock

This under-the-radar company specializes in semiconductor products that titans like NVIDIA don't build. It's uniquely positioned to take advantage of the next growth stage of this market. And it's just beginning to enter the spotlight, which is exactly where you want to be.

With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $971 billion by 2028.

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KLA Corporation (KLAC): Free Stock Analysis Report

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

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