Semiconductor stocks erupted in 2025 following a surge in demand driven by AI infrastructure buildout by hyperscalers. These computer chips, also known as semis, microchips or chips, are an essential component in almost all modern electronic devices.
They can be found in everyday consumer products, including smartphones, laptops, televisions, and washing machines. They also have applications in many other areas, such as information technology, artificial intelligence, communications infrastructure, medical equipment, transportation networks and military systems. In fact, it’s no exaggeration to say that semiconductors are integral to the entire global economy.
According to the Semiconductor Industry Association, a record 1.3 trillion units were shipped in 2025 with sales surpassing $600bn for the first time. But with AI infrastructure spending still marching upward, analysts’ forecasts are projecting even more growth before the end of the decade.
This could make UK semiconductor stocks an attractive proposition. But what are the best chip companies to invest in, and is this market sector right for you?
What are semiconductor stocks?
Semiconductor stocks are companies that design and manufacture computer chips, whose shares can be bought and sold on a public stock market.
The industry is sometimes divided into two sub-sectors:
- Semiconductors
- Semiconductor Equipment & Materials
Companies in the former category are producers of semiconductor chips. Companies in the latter category supply tools, parts, and equipment to the semiconductor industry.
Top semiconductor stocks in the UK
Here are the leading UK semiconductor shares traded on the London Stock Exchange in order of market cap as of January 2026:
| Company | Market Cap | Description |
| Oxford Instruments (LSE:OXIG) | £1.24bn | Provides systems and tools with a key focus on the semiconductor and communications markets. |
| IQE (LSE:IQE) | £88.0m | Provides compound wafer products to the semiconductor industry. |
| CML Microsystems (LSE:CML) | £44.0m | Provides a range of semiconductor devices for applications in the communications market. |
| Nanoco Group (LSE:NANO) | £15.9m | Provides quantum dots and other nanomaterials to the semiconductor industry. |
Oxford Instruments
Oxford Instruments is a long-established and profitable technology company. It’s also currently among the largest UK semiconductor stocks.
The company serves a range of different markets, including materials analysis as well as healthcare & life sciences. But in recent years, semiconductors have become an increasingly larger core part of operations, generating 29% of revenue in 2025 – it’s the second largest segment.
Management has signalled its confidence in further growth in demand by building a new state-of-the-art facility in Bristol to house its compound semiconductor systems business. Capabilities include fault-finding and failure analysis within advanced micro devices for the leading semiconductor manufacturers, and cleanliness control in precision manufacturing.
IQE
IQE describes itself as “the leading global supplier of advanced compound semiconductor wafers”. These wafers have a diverse range of applications across handset devices, telecoms infrastructure, and 3D sensing.
In recent years, the company has struggled to maintain growth, with earnings consistently providing elusive growth, a struggle that continued throughout 2025.
However, entering 2026, thanks to the tailwinds of AI spending, the group’s order book does show signs of strength, offering improved demand visibility.
CML Microsystems
CML Microsystems occupies a profitable niche in the development of mixed-signal, radio frequency, and microwave semiconductors for global communications markets. It targets sub-segments with strong growth profiles and high barriers to entry.
CML believes its diverse, blue-chip customer base and broad product range largely protect it from the cyclicality usually associated with the semiconductor industry.
Nanoco Group
Nanoco is another young UK semiconductor company that’s still loss-making – albeit by a small margin.
Its niche focus on quantum dots and nanomaterials limits the group’s current market penetration opportunities. However, with new technological innovations accelerating, demand for its specialised products is slowly starting to ramp up. And in the meantime, the business has continued to deliver resilient revenues reaching £7.6m in its 2025 fiscal year.
Nevertheless, management continues to describe its business as “a world leader in the development, manufacture and supply of quantum dots and other semiconductor nanomaterials”.
Investing in foreign semiconductor markets
UK semiconductor stocks are relatively small when viewed on the world stage. As such, investors seeking to buy shares in industry giants will have to look to overseas stock markets.
Leviathan Taiwan Semiconductor Manufacturing Co and Dutch colossus ASML can both be traded in the US market. And of course, the US has homegrown powerhouses.
- Nvidia Corporation – $4.45trn market cap
- Broadcom Inc – $1.61trn market cap
- Intel Corporation – $232.4bn market cap
- Qualcomm Inc – $175.9bn market cap
A further option for UK investors is to buy shares of the London-listed exchange-traded fund VanEck Semiconductor ETF. The fund holds 25 of the world’s top chip stocks (including the six just mentioned), and is a one-stop shop for broad exposure to the industry.
Are semiconductor stocks right for you?
Investors considering buying a semiconductor stock need to take a number of things into account. First, it’s important to be aware that the industry is highly cyclical. It’s notorious for periodic supply-and-demand imbalances, leading to spells of feast and famine. Investors need to be prepared to accept some large swings in the share prices of semiconductor stocks.
Another thing to be aware of is that the industry is very much driven by the maxim of ‘smaller, faster, cheaper’. There’s constant pressure on chip companies to come up with ever more advanced technology at lower prices. It can be as short as a few months before one state-of-the-art product is overtaken by another.
To successfully compete for market share, semiconductor companies need to sustain a breakneck pace of innovation. As such, it’s necessary to recycle a high percentage of revenue back into research and development (R&D).
The best chip companies to invest in
While global semiconductor sales growth is a given, translating it into profitable growth is less certain. Therefore, picking the best chip companies to invest in can be tricky.
High gross margins, operating margins, and free cash flow generation, relative to sector peers, can indicate a company that’s operationally efficient and adept at identifying good areas to target R&D. These qualities, together with a strong balance sheet, may better equip a firm to navigate the hazards of the semiconductor cycle.
If you’re prepared to accept some large ups and downs in share prices and to put a bit of work into finding the stronger businesses in the industry, tapping into the structural growth of this market sector may be right for you.