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4 Semiconductor Stocks to Buy Amid Strong Industry Growth
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The semiconductor industry has been consistently growing in spite of the coronavirus pandemic-induced macroeconomic crisis, thanks to the increasing adoption of consumer electronics, automotive, industrial tools & equipment, and networking & communication products.
The broader iShares PHLX Semiconductor ETF (SOXX), which measures the performance of the semiconductor industry of the U.S. equity market, has increased 21.6%, while SPDR S&P Semiconductor ETF (XSD), which tracks the S&P Semiconductor Select Industry Index, has gained 22.8% year to date.
Per the latest report from the Semiconductor Industry Association, global semiconductor industry sales were $48.8 billion for the month of October 2021, with a year-over-year and sequential increase of 24% and 1.1%, respectively.
Factors Driving Prospects
The increasing growth in semiconductor sales is attributed to the growing popularity of recent technologies like Internet of Things, artificial intelligence and virtual reality. Semiconductor acts as a key ingredient in developing these advanced technologies.
Various industries including healthcare, defense, retail and agriculture rely on these technologies for digital transformation amid the pandemic. The pandemic also compelled the organizations to adopt a remote-working environment, which has driven the demand for online services and the usage of cloud storage services. This, in turn, has boosted the demand for data centers, thereby creating growth in the semiconductor space.
The growing usage of electronic products such as wearables, smartphones and laptops is also driving the demand for integrated chips. Also, the increasing demand for autonomous and electric vehicles is proliferating the semiconductor industry.
According to the World Semiconductor Trade Statistics, annual global semiconductor sales are expected to register 25.6% growth in 2021, with a market size of $553 billion, driven by strength in memory, analog and logic. Further, the organization expects growth of 8.8% in 2022.
In addition, the Precedence Research report indicates that the semiconductor market is likely to reach $808.5 billion by 2030 from $430 billion in 2021, witnessing a CAGR of 6.6% between 2021 and 2030.
Stocks to Buy
Given the upbeat scenario, here are four semiconductor stocks that are well poised to capitalize on the abovementioned trends. Apart from having strong fundamentals, these stocks sport a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a Growth Score of A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.
ON Semiconductor (ON - Free Report) has been riding on the strength of the automotive segment. Growing investments in advanced driver-assistance systems and wireless charging in the automotive business remain a positive. Further, it is continuously gaining traction among electric vehicle manufacturers for silicon carbide and insulated-gate bipolar transistor-based products.
Apart from this, ON recently made an agreement to acquire GT Advanced Technologies in exchange for $415-million cash. With this acquisition, ON Semiconductor aims to increase the supply of silicon carbide (SiC) to meet the growing customer demand for SiC-based solutions. Further, the acquisition will bode well for the company’s growing efforts to create intelligent power and sensing technologies.
ON Semiconductor, currently sporting a Zacks Rank #1, has a Growth Score of B. It has returned 107.9% over a year.
Image Source: Zacks Investment Research
Microchip Technology (MCHP - Free Report) has been consistently benefiting from the strength of analog and microcontroller businesses. The company’s dominance in 8, 16, and 32-bit PIC microcontrollers remains a major positive factor for driving the top line and bookings growth.
Further, MCHP has acquired notable companies like Tekron International, Microsemi and Atmel to add strength to its product offerings. This remains a tailwind. Further, growing efforts to develop a wide range of innovative and proprietary new linear, mixed signal, power, interface, and timing products to fuel the future growth of the analog business remain beneficial for the company.
Microchip, carrying a Zacks Rank #2 at present, has a Growth Score of B. It has gained 26.9% over a year.
Image Source: Zacks Investment Research
Advanced Micro Devices (AMD - Free Report) is riding on the robust performance of the Computing and Graphics and Enterprise Embedded and Semi-Custom segments. It is benefiting from strong sales of Ryzen and EPYC server processors owing to the increasing proliferation of AI and machine learning in industries like cloud gaming and supercomputing.
Further, the growing clout of seven nanometer products in the data center vertical — driven by work-from-home and online learning trends — remains a key catalyst for AMD. In addition, its partnership with Microsoft to bring powerful and reliable computing to users with Windows 11 — powered by Ryzen processors and Radeon graphics — remains a notable step.
Advanced Micro Devices, also carrying a Zacks Rank #2, has a Growth Score of A. Over a year, the stock has returned 55.9%.
Image Source: Zacks Investment Research
MACOM Technology (MTSI - Free Report) is benefiting from solid momentum in the data center market. The growing proliferation of cloud services is benefiting both domestic and international deployments of the company.
High-performance analog components such as TIAs, CDRs and drivers, required in 100G deployment, are strengthening MTSI’s presence in the data center market. Further, product introductions like the two-chip analog solution to sustain momentum in the data center market remain noteworthy for MTSI.
MACOM, carrying a Zacks Rank #2 at present, has a Growth Score of A. Over a year, the stock has returned 41.8%.
Image Source: Zacks Investment Research
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4 Semiconductor Stocks to Buy Amid Strong Industry Growth
The semiconductor industry has been consistently growing in spite of the coronavirus pandemic-induced macroeconomic crisis, thanks to the increasing adoption of consumer electronics, automotive, industrial tools & equipment, and networking & communication products.
The broader iShares PHLX Semiconductor ETF (SOXX), which measures the performance of the semiconductor industry of the U.S. equity market, has increased 21.6%, while SPDR S&P Semiconductor ETF (XSD), which tracks the S&P Semiconductor Select Industry Index, has gained 22.8% year to date.
Per the latest report from the Semiconductor Industry Association, global semiconductor industry sales were $48.8 billion for the month of October 2021, with a year-over-year and sequential increase of 24% and 1.1%, respectively.
Factors Driving Prospects
The increasing growth in semiconductor sales is attributed to the growing popularity of recent technologies like Internet of Things, artificial intelligence and virtual reality. Semiconductor acts as a key ingredient in developing these advanced technologies.
Various industries including healthcare, defense, retail and agriculture rely on these technologies for digital transformation amid the pandemic. The pandemic also compelled the organizations to adopt a remote-working environment, which has driven the demand for online services and the usage of cloud storage services. This, in turn, has boosted the demand for data centers, thereby creating growth in the semiconductor space.
The growing usage of electronic products such as wearables, smartphones and laptops is also driving the demand for integrated chips. Also, the increasing demand for autonomous and electric vehicles is proliferating the semiconductor industry.
According to the World Semiconductor Trade Statistics, annual global semiconductor sales are expected to register 25.6% growth in 2021, with a market size of $553 billion, driven by strength in memory, analog and logic. Further, the organization expects growth of 8.8% in 2022.
In addition, the Precedence Research report indicates that the semiconductor market is likely to reach $808.5 billion by 2030 from $430 billion in 2021, witnessing a CAGR of 6.6% between 2021 and 2030.
Stocks to Buy
Given the upbeat scenario, here are four semiconductor stocks that are well poised to capitalize on the abovementioned trends. Apart from having strong fundamentals, these stocks sport a Zacks Rank #1 (Strong Buy) or 2 (Buy) and a Growth Score of A or B. You can see the complete list of today’s Zacks #1 Rank stocks here.
ON Semiconductor (ON - Free Report) has been riding on the strength of the automotive segment. Growing investments in advanced driver-assistance systems and wireless charging in the automotive business remain a positive. Further, it is continuously gaining traction among electric vehicle manufacturers for silicon carbide and insulated-gate bipolar transistor-based products.
Apart from this, ON recently made an agreement to acquire GT Advanced Technologies in exchange for $415-million cash. With this acquisition, ON Semiconductor aims to increase the supply of silicon carbide (SiC) to meet the growing customer demand for SiC-based solutions. Further, the acquisition will bode well for the company’s growing efforts to create intelligent power and sensing technologies.
ON Semiconductor, currently sporting a Zacks Rank #1, has a Growth Score of B. It has returned 107.9% over a year.
Microchip Technology (MCHP - Free Report) has been consistently benefiting from the strength of analog and microcontroller businesses. The company’s dominance in 8, 16, and 32-bit PIC microcontrollers remains a major positive factor for driving the top line and bookings growth.
Further, MCHP has acquired notable companies like Tekron International, Microsemi and Atmel to add strength to its product offerings. This remains a tailwind. Further, growing efforts to develop a wide range of innovative and proprietary new linear, mixed signal, power, interface, and timing products to fuel the future growth of the analog business remain beneficial for the company.
Microchip, carrying a Zacks Rank #2 at present, has a Growth Score of B. It has gained 26.9% over a year.
Advanced Micro Devices (AMD - Free Report) is riding on the robust performance of the Computing and Graphics and Enterprise Embedded and Semi-Custom segments. It is benefiting from strong sales of Ryzen and EPYC server processors owing to the increasing proliferation of AI and machine learning in industries like cloud gaming and supercomputing.
Further, the growing clout of seven nanometer products in the data center vertical — driven by work-from-home and online learning trends — remains a key catalyst for AMD. In addition, its partnership with Microsoft to bring powerful and reliable computing to users with Windows 11 — powered by Ryzen processors and Radeon graphics — remains a notable step.
Advanced Micro Devices, also carrying a Zacks Rank #2, has a Growth Score of A. Over a year, the stock has returned 55.9%.
MACOM Technology (MTSI - Free Report) is benefiting from solid momentum in the data center market. The growing proliferation of cloud services is benefiting both domestic and international deployments of the company.
High-performance analog components such as TIAs, CDRs and drivers, required in 100G deployment, are strengthening MTSI’s presence in the data center market. Further, product introductions like the two-chip analog solution to sustain momentum in the data center market remain noteworthy for MTSI.
MACOM, carrying a Zacks Rank #2 at present, has a Growth Score of A. Over a year, the stock has returned 41.8%.