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Microchip Sales Poised to Grow on Soaring Demand: 5 Winners

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The semiconductor industry is struggling to meet the demand for microchips, the lack of which has compelled many carmakers to temporarily shut down plans. The shortage is likely to continue for some time. However, this is going to help the microchip industry, which is poised to grow further in 2021.

The semiconductor industry has been one of the rare beneficiaries of the pandemic and saw sales soaring owing to higher demand for consumer electronic goods. This demand is likely to be on the higher side throughout the year.

Semiconductor Industry Poised to Grow

According to the Semiconductor Industry Association (SIA), microchip sales are expected to grow 8.4% on a year-over-year basis in 2021. SIA predicts that sales will continue to soar as the supply shortage might last through the fourth quarter.

The shortage of microchips is already being felt across several industries in the United States, with carmakers suffering the most. So much so that many automakers are now temporarily closing down plants, compelling President Joe Biden to sing an executive order to do a review of the supply chains, the report of which needs to be submitted within 100 days.

Moreover, the President has proposed a budget of $37 billion for the CHIPS for America Act to bolster the already thriving semiconductor industry.

Pandemic Boosting Chip Sales

The supply crunch has left many industries worried but has also been helping the microchip industry as demand continues to soar. As more people stayed home during the pandemic and bought consumer electric goods, the semiconductor industry started struggling to meet the growing demand.

The microchip industry’s revenues rebounded in 2020. According to a preliminary report from Gartner, global microchip revenues touched 449.8 billion in 2020, increasing 7.3% from 2019.

Also, 2021 has started on a high note with semiconductor sales jumping in January. According to SIA, global semiconductor sales surged 13.2% in January to $40 billion from $35.3 billion a year ago. Also, on a month-over-month basis, sales increased 1% from December’s total of $39.6 billion.

Our Choices

The semiconductor market is likely to continue thriving in 2021. Below are five chip stocks that investors can gain from in the current scenario.

NXP Semiconductors N.V. (NXPI - Free Report)  provides high-performance, mixed-signal and standard product solutions that leverage its RF, analog, power management, interface, security, as well as digital processing expertise. 

The company’s expected earnings growth rate for the next year is 19.4%. The Zacks Consensus Estimate for current-year earnings has improved 19.1% over the past 60 days. NXP Semiconductors carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Maxim Integrated Products, Inc. is an original equipment manufacturer of semiconductor analog and mixed-signal integrated circuits. The company has a broad product portfolio that includes analog-to-digital converters, amplifiers and comparators, communications devices, data converters, and management components, sensors and wireless products.

The company’s expected earnings growth rate for the current year is 31.9%. The Zacks Consensus Estimate for current-year earnings has improved 5.7% over the past 60 days. Maxim Integrated Products holds a Zacks Rank #2.

Micron Technology, Inc. (MU - Free Report) through its global brands, namely Micron, Crucial and Ballistix, manufactures and markets high-performance memory and storage technologies including Dynamic Random Access Memory, NAND flash memory, NOR Flash, 3D XPoint memory and other technologies.

The company’s expected earnings growth rate for the current year is 59%. The Zacks Consensus Estimate for current-year earnings has improved 21% over the past 60 days. Micron sports a Zacks Rank #1.  

Texas Instruments Incorporated (TXN - Free Report) is an original equipment manufacturer of analog, mixed-signal and digital-signal processing integrated circuits.

The company’s expected earnings growth rate for the current year is 12.1%. The Zacks Consensus Estimate for current-year earnings has improved 14.4% over the past 30 days. Texas Instruments carries a Zacks Rank #2.

NVIDIA Corporation (NVDA - Free Report) is the worldwide leader in visual computing technologies and inventor of the graphic processing unit. Over the years, the company’s focus has evolved from PC graphics to artificial intelligence-based solutions that now support high-performance computing, gaming and virtual reality platforms.

The company’s expected earnings growth rate for the current year is 32.7%. The Zacks Consensus Estimate for current-year earnings has improved 13.9% over the past 60 days. NVIDIA has a Zacks Rank #2.

These Stocks Are Poised to Soar Past the Pandemic

The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.

Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.

See the 5 high-tech stocks now>>

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