Qnity: Set to Benefit from Semiconductor Volume Growth

Key Morningstar Metrics for Qnity Electronics

• Fair Value Estimate: $120.00
• Morningstar Rating: ★★★
• Morningstar Economic Moat Rating: Narrow
• Morningstar Uncertainty Rating: High

Semiconductor volumes are set to grow as a result of artificial intelligence, which currently generates around one-fourth of total semiconductor industry revenue. Semiconductor materials and chemicals firms, including Qnity Electronics Q, are set to benefit from higher volumes and the shift to more advanced chips, which have smaller nodes and generally require more volumes of higher-priced chemicals and materials than older chips.

The bottom line: We raise our fair value estimate for narrow-moat Qnity to $120 per share from $100 as we incorporate our positive outlook and higher growth rate for the semiconductor materials firms.

• We think Qnity is well-positioned for long-term growth in semiconductors from higher volumes and a growing proportion of sales to advanced chips. Qnity should also benefit from the data center buildout as data centers require interconnect solutions materials.
• At current prices, we view Qnity shares as undervalued, with the stock trading a little less than 20% below our updated fair value estimate.

Long view: We forecast Qnity’s revenue will grow at an average of 8% over the next five years, above management’s guidance for 6%-7% growth. Much of the revenue growth will come from more advanced chips that require premium-priced materials. This should also drive margin expansion over time.

• Qnity was spun off from DuPont in late 2025 with a solid balance sheet. We expect the company will generate strong free cash flow even after its growth investments. This positions Qnity well for the long term, which is important, given the cyclical nature of the semiconductor industry.