Back to top

Image: Bigstock

5 Microchip Stocks to Buy As Industry Is On Track for Growth

Read MoreHide Full Article

Demand for semiconductors has been on the rise but a massive supply shortage has been crippling several industries, especially automotive and electronic goods. This has seen different governments taking several steps to address the issue.

Last week, a bilateral group of U.S. senators proposed a tax credit from semiconductor manufacturing investments. Also, the Senate approved billions of dollars to boost semiconductor manufacturing in the United States. This is likely to solve the supply shortage to some extent. At the same time, the shortage once again proves that the microchip industry is in great shape and likely to perform well in the coming days.

Boost for Semiconductor Industry

Last week, the Senate passed a $52 billion bill for domestic semiconductor manufacturing. This includes $2 billion earmarked especially for auto chip manufacturing. The auto industry has been one of the major sufferers of the supply shortage, which has compelled many to slash production, severely impacting sales and revenues.

The massive funding is expected to lead to seven to 10 U.S. semiconductor plants and generate $150 billion in production and research. Also, the Senate proposed a 25% tax credit for semiconductor manufacturers that is likely to boost their morale and lead to higher production.

The semiconductor industry has been doing well but higher demand following the pandemic has seen a shortage in supply. The pandemic saw people working and learning from home, which gave a boost to the sales of PCs and other personal gadgets. Also, sales of electronic goods saw a jump during this period, which spurred demand for microchips.

Semiconductor Industry on a High

After a successful 2020, semiconductor sales have growing every month this year too. According to the Semiconductor Industry Association (SIA), worldwide sales of semiconductors soared 21.7% year over year in April to $41.8 billion from $34.4 billion. On a month-over-month basis, microchip sales grew 1.9% to $41 billion in April.

This rise in demand is directly benefiting the semiconductor industry. The World Semiconductor Trade Statistics (WSTS) expects semiconductor sales to grow further in the coming months. According to the WSTS Spring 2021 global semiconductor sales forecast, microchip sales will jump 19.7% to $527.2 in 2021 from $440.4 billion in 2020.

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.

Nvidia Corporation (NVDA - Free Report) is the worldwide leader in visual computing technologies and the 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 58.4%. The Zacks Consensus Estimate for current-year earnings has improved 18.5% over the past 60 days. Nvidia has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank 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 38.5%. The Zacks Consensus Estimate for current-year earnings has improved 5% over the past 60 days. Maxim Integrated Products holds a Zacks Rank #2 (Buy).

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 next year is 22.6%. The Zacks Consensus Estimate for current-year earnings has improved 7.9% over the past 60 days. NXP Semiconductors carries a Zacks Rank #2.

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 23.8%. The Zacks Consensus Estimate for current-year earnings has improved 9.2% over the past 60 days. Texas Instruments carries 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 96.1%. The Zacks Consensus Estimate for current-year earnings has improved 1.3% over the past 60 days. Micron carries a Zacks Rank #2.

Infrastructure Stock Boom to Sweep America

A massive push to rebuild the crumbling U.S. infrastructure will soon be underway. It’s bipartisan, urgent, and inevitable. Trillions will be spent. Fortunes will be made.

The only question is “Will you get into the right stocks early when their growth potential is greatest?”

Zacks has released a Special Report to help you do just that, and today it’s free. Discover 7 special companies that look to gain the most from construction and repair to roads, bridges, and buildings, plus cargo hauling and energy transformation on an almost unimaginable scale.

Download FREE: How to Profit from Trillions on Spending for Infrastructure >>