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5 Solid Stocks to Buy on a Booming Semiconductor Market

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The semiconductor industry continues to thrive amid a global supply crisis that has kept several other sectors under pressure. With demand for semiconductors on the rise, global sales once again moved northward in June.

According to the Semiconductor Industry Association (SIA), global semiconductor sales reflected both a month-over-month and a year-over-year increase in June. Given the growing demand and higher sales, the semiconductor industry is only likely to flourish in the near term.

Microchip Sales Jump in June

The SIA said on Aug 2 that global semiconductor sales rose 2.1% in June to $44.5 billion from $43.6 billion in May. On a year-over-year basis, sales surged 29.2% from the June 2020 total of $34.5 billion.

High demand across sectors, including auto and computer and electronic goods made it a great quarter for the microchip industry. Semiconductor sales came in at $133.6 billion in the second quarter, reflecting an increase of 29.2% year over year and a jump of 8.3% from the first quarter of 2021. 

Regionally, sales increased year over year in all major markets. Sales in Europe grew 43.2%, while in Asia-Pacific and China it jumped 34% and 28.3%, respectively, followed by 22.9% in the Americas and 21.2% in Japan.

Semiconductor Industry Thriving

The dream run for the semiconductor manufacturers continues after an outstanding 2020. With the pandemic wreaking havoc in most industries, the semiconductor industry emerged as one of its rare beneficiaries, with sales skyrocketing.

As more people worked and learnt from home, demand for personalized products like computers, electronic goods and other gadgets rose, which automatically drove sales of microchips. Moreover, with no options left for entertainment, videogames became a hot-selling property, which also went in favor of the semiconductor manufacturers.

Sales were up an impressive 8.3% year over year to $117.5 billion in the fourth quarter and the first quarter held on to the momentum, in fact proving to be even better.

Further, the auto industry, which had come to a standstill after the pandemic struck, started speeding up production to make up for the losses suffered, adding on to the already surging demand for microchips. This has resulted in a supply crunch, which is now hurting some industries especially automobiles.

Our Choices

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

Texas Instruments Incorporated (TXN - Free Report) is an original equipment manufacturer of analog, mixed-signal and digital-signal processing integrated circuits. The company recently announced that it will be introducing a new TI-84 graphing calculator that will supportthe programming language Python.

The company’s expected earnings growth rate for the current year is 31.7%. The Zacks Consensus Estimate for current-year earnings improved 6.5% over the past 60 days. Texas Instruments 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. Maxim announced on Aug 4 that it will team up with Xailient Inc., a company focused on AI for the edge, to come up with the world’s fastest-power and lowest-power IoT face detection.

The company’s expected earnings growth rate for the current year is 16.4%. The Zacks Consensus Estimate for current-year earnings improved 3.6% over the past 60 days. Maxim Integrated Products holds a Zacks Rank #2.

Semtech Corporation’s (SMTC - Free Report) devices are used in a variety of applications including computer, communications, industrial, military-aerospace and automotive. The company also provides a limited amount of wafer foundry services to other electronic component manufacturers.

The company’s expected earnings growth rate for the current year is 39.4%. The Zacks Consensus Estimate for current-year earnings improved 0.4% over the past 60 days. Semtech has a Zacks Rank #2.

Analog Devices, Inc. (ADI - Free Report) is an original equipment manufacturer of semiconductor devices, specifically, analog, mixed-signal and digital signal processing integrated circuits.

The company’s expected earnings growth rate fornext year is 27.9%. The Zacks Consensus Estimate for current-year earnings improved 0.2% over the past 60 days. Analog Devices carries a Zacks Rank #2.

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 22.8%. The Zacks Consensus Estimate for current-year earnings improved 0.2% over the past 60 days. NXP Semiconductors carries a Zacks Rank #2.