The semiconductor space has witnessed strong growth so far this year despite the coronavirus crisis on robust data center chip demand and solid momentum in smartphone processors.
Ongoing infusion of AI and ML, momentum in digitization, high performance computing (HPC) applications, gaming, wearables, drones, electric vehicles (EVs) and VR/AR devices are fueling massive growth in the semiconductor space. This can primarily be attributed to the coronavirus crisis, which has led to increase in usage of online services globally. These factors have helped the semiconductor giant NVIDIA ( NVDA Quick Quote NVDA - Free Report) and other notable companies like Advanced Micro Devices ( AMD Quick Quote AMD - Free Report) , Inphi Corporation ( IPHI Quick Quote IPHI - Free Report) , Lattice Semiconductor ( LSCC Quick Quote LSCC - Free Report) , and Himax Technologies ( HIMX Quick Quote HIMX - Free Report) to deliver a blockbuster run on the bourses through 2020. Notably, the broader iShares PHLX Semiconductor ETF (SOXX) is up 48.7% compared with the SPDR S&P 500 ETF's (SPY) rally of 14.3% year to date. Sustaining Runaway 2020 Success in 2021
Apprehensions regarding the outbreak of new COVID-19 strain is likely to accelerate the digitization push, with work-from-home and web-based learning trends bolstering demand for processors utilized in enterprise laptops, data center servers, PC systems, notebooks, tablets, and smartphones. This, in turn is expected to benefit the chip stocks in 2021.
Recovery in automotive end-market, and growing clout of high-speed networking, smartphone processors and high-performance data center applications necessitate the delivery of advanced chips further, which in turn favors prospects. Further, evolution of semiconductor manufacturing processes from 10 nanometer (nm) to 7 nm and even 5 nm technology is opening new business avenues. Microchip demand is expected to get a boost with the 5G boom in Europe and parts of Asia, including China and Singapore. IDC expects 5G smartphone shipments to grow to 58% in 2024 from 19% of global volume in 2020, which should act as a tailwind for the semiconductor market. In fact, per latest World Semiconductor Trade Statistics data, worldwide sales of semiconductors are now projected to hit $433 billion in 2020, suggesting year-over-year improvement of 5.1%, driven by memory and sensors. Previously, it was estimated to hit $426 billion, indicating growth of 3.3%. Also, the global semiconductor market is now predicted to improve 8.4% in 2021, based on double-digit growth of memory and optoelectronics, compared with previously projected growth of 6.2%. These considerations are expected to help the aforementioned semiconductor stocks, maintain market beating momentum in 2021. Year-to-Date Price Performance NVIDIA shares are up 126.6% year to date. This Zacks Rank #2 (Buy) company is benefiting from the pandemic-induced work-from-home and learn-at-home wave. You can see . the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here NVIDIA has witnessed solid demand for GeForce desktop and notebook GPUs, which is driving gaming revenues. Moreover, a surge in Hyperscale demand is a tailwind for the company’s Data Center business. Moreover, Arm acquisition is expected to aid NVIDIA in offering end-to-end ecosystem of technology across the data center, IoT, autonomous vehicles and mobile domains. NVIDIA is now well poised to upscale its inference technology, drivers, and accelerators by utilizing Arm’s robust architecture and chip designs. NVIDIA has a market cap of $330.11 billion. The Zacks Consensus Estimate for its fiscal 2021 earnings has been revised upward by 3.4% in the past 30 days to $9.71 per share. The figure indicates growth of 67.7% on a year-over-year basis. Investors looking for lucrative $10 stocks, can count on Himax Technologies. The stock has rallied 157.1% year to date. The company primarily designs, develops and markets semiconductors that are critical components of flat panel displays. The company’s products include liquid crystal on silicon (LCOS) and depth-sensing cameras that play a crucial role in the AR market. Notably, LCOS chips are utilized to block light in AR/VR headsets. Depth-sensing cameras are utilized to measure distances to place digital objects. Several AR devices including Alphabet’s (GOOGL) Google Glass and Microsoft’s ( MSFT Quick Quote MSFT - Free Report) HoloLens use the Zacks Rank #2 company’s products, which favors business prospects. Himax has a market cap of $1.18 billion. The Zacks Consensus Estimate for its 2021 earnings has been revised upward by 25.7% in the past 60 days to 44 cents per share. Inphi Corporation stock has soared 114.3% so far this year. The fabless provider of high-speed analog semiconductor solutions for the communications and computing markets is well positioned to benefit from the new normal as it has a broad range of products targeting the two revolutions in cloud computing and 5G. Further, this Zacks Rank #2 company’s products are used in telecommunications transport systems, enterprise networking equipment, datacenter and enterprise servers, storage platforms, test and measurement equipment and military systems. Notably, Marvell has inked deal to acquire the company for $10 billion in cash and shares, which is the primary reason behind its share appreciation this year. The buyout is set to close in the second half of 2021. Inphi has a market cap of $8.27 billion. The Zacks Consensus Estimate for its 2021 earnings has been revised upward by 2.2% in the past 60 days to $3.75 per share. Advanced Micro Devices has been one of the star performers so far this year rallying 103.3%. Investors’ confidence regarding robust uptick in Ryzen and EPYC server processors, courtesy of increasing proliferation of AI and Machine Learning (ML) in industries like cloud gaming and supercomputing domain led to the scintillating show. Growing clout of 7 nm products in the data center vertical, driven by coronavirus crisis induced work-from-home and online learning trends, aided AMD withstand volatility and broad-based macroeconomic weakness. Moreover, notable customer wins on the back of its high-performance portfolio of processors and continued innovation in HPC ecosystem is a major growth driver. Further, the Xilinx ( XLNX Quick Quote XLNX - Free Report) acquisition is expected to significantly boost AMD's data center business. Also, partnerships with Amazon, Microsoft, Baidu and JD.com are opening newer business avenues. Notably, this Zacks Rank #3 (Hold) stock has a market cap of $115.36 billion. The Zacks Consensus Estimate for its 2021 earnings has been revised upward by 11.7% in the past 60 days to $1.81 per share. Lattice Semiconductor stock has registered gains of 128.3% on a year-to-date basis. Strength in new products that include the CrossLinkNX, Nexus Platform, and other latest low power FPGAs, and solid momentum across the communications market, primarily courtesy of rapid deployment of 5G infrastructure, are expected to drive the top line in the quarters ahead. In computing space, this Zacks Rank #3 company is poised to benefit from strong footprint across a number of OEM server platforms. The company’s efforts to increase content in next generation servers by adding security functionality with the new MachXO3D product family bode well. Further, Lattice’s devices — that offer support for functions like security, video bridging and IO aggregation in different form factors — are expected to help it in gaining traction among client computing platforms. Additionally, recovery across industrial and automotive markets is anticipated to help it in gaining new design wins through 2021. Notably, this Zacks Rank #3 stock has a market cap of $5.95 billion. The Zacks Consensus Estimate for its current year earnings has been revised upward by 6.3% in the past 60 days to 67 cents per share. Zacks Top 10 Stocks for 2021
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