3 Electronics Stocks Set to Benefit From a Prospering Industry

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 through 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, 3 nm and 2 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 AI infrastructure investments, increasing compute intensity, and the need for more advanced power, thermal, automation and testing solutions. Strong hyperscaler spending, rapid advanced packaging adoption and large-scale data center buildouts are key catalysts. The rapid growth of AI workloads is increasing process complexity, driving higher demand for process control, metrology, inspection, specialty materials, precision timing and semiconductor test equipment. Meaningful recovery in industrial automation and digital infrastructure markets bodes well for industry participants.

Demand for Integrated Solutions is Rising: The industry is increasingly moving toward integrated solutions that combine compute, power, cooling, automation and energy management. This shift from discrete subsystem deployments is creating opportunities for suppliers with broad technology portfolios and systems-level capabilities. 

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.  Supply chains remain under pressure as companies work to secure capacity and critical components to support rapidly rising AI-driven demand, while extended lead times and infrastructure bottlenecks, particularly around power availability, are constraining the pace of data center deployment. Additionally, memory price volatility, tariff-related cost increases, and the growing concentration of demand among a small number of hyperscale and AI customers are major concerns for industry players.

Zacks Industry Rank

The Zacks Electronics – Miscellaneous Products industry is housed within the broader Zacks Computer and Technology sector. The industry carries a Zacks Industry Rank #72, which places it in the top 29% of more than 246 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 Dec. 31, 2025, earnings estimates for the industry for the current year have moved north by 13.4%.

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 57.8% during this period compared with the S&P 500 composite’s return of 20.8% and the broader sector’s appreciation of 28.6%.

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 28.27X compared with the S&P 500’s 20.37X and the sector’s forward-12-month P/E of 20.90X.

Over the last five years, the industry has traded as high as 44.84X and as low as 26.50X, with the median being 29.36X, as the charts below show.

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

3 Stocks to Buy Right Now

Teradyne: This Zacks Rank #1 (Strong Buy) company’s shares have appreciated 88.5% year to date (YTD). You can see the complete list of today’s Zacks #1 Rank stocks here.

Rising AI investment is increasing demand for CPUs, accelerators, networking chips, HBM, DDR and storage, driving demand for semiconductor test. Teradyne expects higher wafer-fab equipment spending to drive faster transistor and memory-bit production, supporting expansion of the automated test equipment (ATE) market. The company sees a path for the overall ATE TAM to reach or exceed $20 billion as WFE spending approaches $250 billion by the end of the decade.

Increasing chiplet counts and more complex multichip packages require greater testing intensity to ensure acceptable yields, creating a structural tailwind for Teradyne. The company is also positioned to gain share through merchant GPU programs, hyperscaler dual-sourcing and its strong position in HBM and DRAM testing.

The Zacks Consensus Estimate for Teradyne’s 2026 earnings has jumped 26.4% to $9.10 per share over the past 30 days.

Price and Consensus: TER

Garmin: Another Zacks Rank #1 stock, Garmin’s Fitness business remains a major growth engine, with second-quarter revenues rising 25% on strong demand for advanced wearables. New products such as the Forerunner lineup and CIRQA Smart Band are broadening Garmin’s addressable market, while the TrainingPeaks and TrainHeroic acquisitions expand its services ecosystem and create a more integrated training experience for customers.

Garmin continues to benefit from new-product launches and resilient demand across aviation and marine. Aviation is supported by strong OEM backlogs and aftermarket demand, while the new AXIS integrated cockpit platform could broaden adoption by reducing installation cost and complexity. Marine growth is supported by products such as LiveScope 2, which strengthens Garmin’s position in premium sonar technology.

The Zacks Consensus Estimate for GRMN’s 2026 earnings has increased 4.3% over the past 30 days to $9.94 per share. Garmin shares have surged 43.5% YTD.

Price and Consensus: GRMN

KLA: This Zacks Rank #2 (Buy) company is benefiting from accelerating investment in AI infrastructure, leading-edge foundry/logic, HBM and advanced packaging. More complex device architectures, higher-value wafers and tighter performance specifications are increasing the need for inspection and metrology. KLA expects advanced-packaging process-control systems revenues to reach roughly $1.1 billion in calendar 2026, up more than 70% year over year.

Rising investment across leading-edge logic, DRAM, HBM, NAND and new greenfield fabs should support continued equipment demand into 2027. Meanwhile, KLA Services is benefiting from a growing installed base and high tool utilization, with roughly 80% of service revenues contract-based. Higher equipment shipments should further expand the service opportunity.

KLAC shares have surged 49.4% YTD. The consensus mark for KLA’s fiscal 2027 earnings has increased 7.1% to $5.43 per share over the past 30 days.

Price and Consensus: KLAC

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

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