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4 Top-Ranked Semiconductor Stocks to Buy Amid Industry Growth
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The global semiconductor chip shortage has been a constraint for the supply chain since the outbreak of the coronavirus pandemic. The ongoing geopolitical tensions are further negatively impacting the semiconductor industry. Also, the unending Ukraine-Russia war and the growing sanctions on Russia remain headwinds, as both the countries are key players in producing raw materials used for plating and fabrication of semiconductors.
Despite the current problems, the industry is witnessing consistent growth. This is evident from the robust performance of the industry for the month of February 2022.
Per the latest report from the Semiconductor Industry Association, global semiconductor industry sales were $52.5 billion for February, with a year-over-year and sequential increase of 32.4% and 3.4%, respectively.
Further, the broader iShares PHLX Semiconductor ETF — which measures the performance of the semiconductor industry in the U.S. equity market — has gained 1.6% over a year. Also, ProShares Ultra Semiconductors ETF has gained 11.3% in the same time frame.
Growth Factors
The increasing growth can be attributed to the United States and the United Kingdom, as both the economies hold strong positions to minimize the effect of war tensions by being major suppliers needed for manufacturing some of the raw materials produced by Russia and Ukraine.
In addition, the increasing adoption of consumer electronics, automotive, industrial tools & equipment, and networking & communication products, autonomous & electric vehicles have been contributing well to the industry growth.
The growing usage of advanced technologies like Artificial Intelligence, Internet of Things, and Virtual Reality in healthcare, defense, retail and agriculture also remains a positive factor. Increasing online learning and remote-working trends have been boosting the demand for processors used in enterprise laptops and data center servers, thereby driving the semiconductor space.
Further, the governments of major economies including China, South Korea, European Union, India and Japan are heavily investing in the industry to cater to the needs of growing chip demand and reduce their dependence on chip imports. Recently, the government of India announced a package of Rs 76,000 crore to set up semiconductor manufacturing plants in several states in a bid to become self-reliant in this sector.
These factors are expected to consistently drive growth in the semiconductor industry in the near term and the long haul.
The Mordor Intelligence report states that the worth of the Semiconductor Industry Landscape was $549.2 billion in 2021. It also states that the industry is expected to be worth $906.3 billion by 2027, witnessing a CAGR of 8.23% between 2022 and 2027.
Stocks to Buy
Given the upbeat scenario, here are four semiconductor stocks that are well poised to capitalize on the above-mentioned trends. Apart from having strong fundamentals, these stocks carry 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.
Semtech Corporation (SMTC - Free Report) is benefiting from strong momentum across industrial and infrastructure markets served. The strength of the Tri-Edge platform, 10G PON products, 5G wireless and broad-based protection platforms has been continuously driving its top-line growth. Additionally, growing shipments in Asia and North America and expanding Pro AV offerings remain tailwinds.
Further, the growing adoption of LoRa devices and LoRaWAN standard, owing to their various use cases in different industries, has been consistently aiding the company’s performance. Smart Paddock, an Australia-based company, recently incorporated Semtech’s LoRa devices and LoRaWAN standard into its Bluebell smart GPS ear tag for monitoring livestock location in real time and analyzing cattle’s behavioural data to solve livestock management issues.
Semtech, currently flaunting a Zacks Rank #1, has a Growth Score of B. The long-term earnings growth rate for the stock is currently projected at 15%.
Micron Technology (MU - Free Report) is riding on the growing demand for memory chips from cloud-computing providers and acceleration in 5G cellular network adoptions. The rising mix of high-value solutions, enhancement in customer engagement and improvement in the cost structure are contributing well to top-line growth.
Further, the company’s growing focus on expanding in the SSD storage market remains noteworthy. Additionally, its recent decision to sell the Utah factory as it quits from making 3D XPoint memory chips will help the company shift the resources toward accelerating the market introduction of Compute Express Link-enabled memory products. The shift in the portfolio strategy is likely to further strengthen Micron’s focus on developing memory and storage products and solutions for the data center.
Micron Technology flaunts a Zacks Rank #2 and holds a Growth Score of A at present. The long-term earnings growth rate for the stock is currently projected at 32%.
NVIDIA (NVDA - Free Report) is benefiting from coronavirus-induced work and learn-from-home wave. It is also gaining from strong growth in GeForce desktop and notebook Graphic Processing Units, which is boosting gaming revenues. Further, a surge in Hyperscale demand remains a tailwind for the company’s Data Center business.
In addition, the expansion of NVIDIA GeForce NOW is expected to drive its user base in the near term. Further, solid uptake of artificial intelligence-based smart cockpit infotainment solutions remains a boon. Additionally, its collaboration with Mercedes-Benz is expected to strengthen NVIDIA’s presence in the autonomous vehicles and other automotive electronics space.
NVIDIA has a Zacks Rank #2 and a Growth Score of B. The long-term earnings growth rate for the stock is currently projected at 16.8%.
Analog Devices (ADI - Free Report) is riding on its strength across consumer, communications, industrial and automotive markets. Solid demand for high-performance analog and mixed-signal solutions is a tailwind. Strong momentum across the electric vehicle space on the back of robust Battery Management System solutions remains a positive factor.
Further, solid momentum of the HEV platform across the cabin electronics ecosystem remains a tailwind. The company remains positive about the prospects associated with the Maxim acquisition, which has bolstered its position in the high-performance semiconductor space. ADI also remains optimistic about the growth opportunities related to 5G.
Analog Devices, currently carrying a Zacks Rank #2, has a Growth Score of B. The long-term earnings growth rate for the stock is currently projected at 12.3%.
Image: Bigstock
4 Top-Ranked Semiconductor Stocks to Buy Amid Industry Growth
The global semiconductor chip shortage has been a constraint for the supply chain since the outbreak of the coronavirus pandemic. The ongoing geopolitical tensions are further negatively impacting the semiconductor industry. Also, the unending Ukraine-Russia war and the growing sanctions on Russia remain headwinds, as both the countries are key players in producing raw materials used for plating and fabrication of semiconductors.
Despite the current problems, the industry is witnessing consistent growth. This is evident from the robust performance of the industry for the month of February 2022.
Per the latest report from the Semiconductor Industry Association, global semiconductor industry sales were $52.5 billion for February, with a year-over-year and sequential increase of 32.4% and 3.4%, respectively.
Further, the broader iShares PHLX Semiconductor ETF — which measures the performance of the semiconductor industry in the U.S. equity market — has gained 1.6% over a year. Also, ProShares Ultra Semiconductors ETF has gained 11.3% in the same time frame.
Growth Factors
The increasing growth can be attributed to the United States and the United Kingdom, as both the economies hold strong positions to minimize the effect of war tensions by being major suppliers needed for manufacturing some of the raw materials produced by Russia and Ukraine.
In addition, the increasing adoption of consumer electronics, automotive, industrial tools & equipment, and networking & communication products, autonomous & electric vehicles have been contributing well to the industry growth.
The growing usage of advanced technologies like Artificial Intelligence, Internet of Things, and Virtual Reality in healthcare, defense, retail and agriculture also remains a positive factor. Increasing online learning and remote-working trends have been boosting the demand for processors used in enterprise laptops and data center servers, thereby driving the semiconductor space.
Further, the governments of major economies including China, South Korea, European Union, India and Japan are heavily investing in the industry to cater to the needs of growing chip demand and reduce their dependence on chip imports. Recently, the government of India announced a package of Rs 76,000 crore to set up semiconductor manufacturing plants in several states in a bid to become self-reliant in this sector.
These factors are expected to consistently drive growth in the semiconductor industry in the near term and the long haul.
The Mordor Intelligence report states that the worth of the Semiconductor Industry Landscape was $549.2 billion in 2021. It also states that the industry is expected to be worth $906.3 billion by 2027, witnessing a CAGR of 8.23% between 2022 and 2027.
Stocks to Buy
Given the upbeat scenario, here are four semiconductor stocks that are well poised to capitalize on the above-mentioned trends. Apart from having strong fundamentals, these stocks carry 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.
Semtech Corporation (SMTC - Free Report) is benefiting from strong momentum across industrial and infrastructure markets served. The strength of the Tri-Edge platform, 10G PON products, 5G wireless and broad-based protection platforms has been continuously driving its top-line growth. Additionally, growing shipments in Asia and North America and expanding Pro AV offerings remain tailwinds.
Further, the growing adoption of LoRa devices and LoRaWAN standard, owing to their various use cases in different industries, has been consistently aiding the company’s performance. Smart Paddock, an Australia-based company, recently incorporated Semtech’s LoRa devices and LoRaWAN standard into its Bluebell smart GPS ear tag for monitoring livestock location in real time and analyzing cattle’s behavioural data to solve livestock management issues.
Semtech, currently flaunting a Zacks Rank #1, has a Growth Score of B. The long-term earnings growth rate for the stock is currently projected at 15%.
Semtech Corporation Price and Consensus
Semtech Corporation price-consensus-chart | Semtech Corporation Quote
Micron Technology (MU - Free Report) is riding on the growing demand for memory chips from cloud-computing providers and acceleration in 5G cellular network adoptions. The rising mix of high-value solutions, enhancement in customer engagement and improvement in the cost structure are contributing well to top-line growth.
Further, the company’s growing focus on expanding in the SSD storage market remains noteworthy. Additionally, its recent decision to sell the Utah factory as it quits from making 3D XPoint memory chips will help the company shift the resources toward accelerating the market introduction of Compute Express Link-enabled memory products. The shift in the portfolio strategy is likely to further strengthen Micron’s focus on developing memory and storage products and solutions for the data center.
Micron Technology flaunts a Zacks Rank #2 and holds a Growth Score of A at present. The long-term earnings growth rate for the stock is currently projected at 32%.
Micron Technology, Inc. Price and Consensus
Micron Technology, Inc. price-consensus-chart | Micron Technology, Inc. Quote
NVIDIA (NVDA - Free Report) is benefiting from coronavirus-induced work and learn-from-home wave. It is also gaining from strong growth in GeForce desktop and notebook Graphic Processing Units, which is boosting gaming revenues. Further, a surge in Hyperscale demand remains a tailwind for the company’s Data Center business.
In addition, the expansion of NVIDIA GeForce NOW is expected to drive its user base in the near term. Further, solid uptake of artificial intelligence-based smart cockpit infotainment solutions remains a boon. Additionally, its collaboration with Mercedes-Benz is expected to strengthen NVIDIA’s presence in the autonomous vehicles and other automotive electronics space.
NVIDIA has a Zacks Rank #2 and a Growth Score of B. The long-term earnings growth rate for the stock is currently projected at 16.8%.
NVIDIA Corporation Price and Consensus
NVIDIA Corporation price-consensus-chart | NVIDIA Corporation Quote
Analog Devices (ADI - Free Report) is riding on its strength across consumer, communications, industrial and automotive markets. Solid demand for high-performance analog and mixed-signal solutions is a tailwind. Strong momentum across the electric vehicle space on the back of robust Battery Management System solutions remains a positive factor.
Further, solid momentum of the HEV platform across the cabin electronics ecosystem remains a tailwind. The company remains positive about the prospects associated with the Maxim acquisition, which has bolstered its position in the high-performance semiconductor space. ADI also remains optimistic about the growth opportunities related to 5G.
Analog Devices, currently carrying a Zacks Rank #2, has a Growth Score of B. The long-term earnings growth rate for the stock is currently projected at 12.3%.
Analog Devices, Inc. Price and Consensus
Analog Devices, Inc. price-consensus-chart | Analog Devices, Inc. Quote