The chip industry has been under the spotlight throughout 2021 due to huge gains despite the pandemic-led uncertainties. ProShares Ultra Semiconductors ETF and Direxion Daily Semiconductor Bull have returned more than 100% year to date. ProShares Ultra Semiconductors and Direxion Daily Semiconductor Bull gained 117.1% and 134.7%, respectively, outperforming the SPDR S&P 500 ETF's rally of 27.6%. The monthly data on global semiconductor sales from Semiconductor Industry Association for October 2021 testifies the above-mentioned fact. The sales figure was $48.8 billion, up 24% on a year-over-year basis. Growth Factors to Consider The coronavirus-induced solid trend for remote-working and learning has been continuously aiding chip companies on the heels of the rising demand for desktops, notebooks and enterprise laptops. The rising demand for chips required in data centers due to the work-from-home trend-led growing adoption of cloud services has been another major tailwind. More precisely, the growing use of server solid state drives in data centers, which has been driving growth in the NAND market, has been benefiting semiconductor stocks hugely. The accelerating deployment of 5G along with the increasing uptake of 5G smartphones has also been contributing well to semiconductor sales. The growing proliferation of advanced technologies, including AI, ML, AR/VR, IoT, quantum computing and blockchain, is continuously bolstering the semiconductor demand worldwide. The rapid adoption of autonomous vehicles, advanced driver-assisted systems, gaming, wearables, drones and VR/AR devices is further fueling growth in the semiconductor industry. Strong rebound in the automotive end-market has been another major positive. We believe that the above-mentioned growth factors are likely to persist in 2022. The rising uncertainties associated with the outbreak of the Omicron variant worldwide are expected to drive the ongoing momentum in remote working. This, in turn, is likely to boost prospects in the semiconductor industry in the upcoming year. Per the World Semiconductor Trade Statistics data, annual semiconductor sales for 2022 are projected at US$ 601 billion, reflecting growth of 8.8%. Stocks to Watch Given the upbeat scenario, here we have picked four chip stocks that investors can focus on as the stocks boast strong fundamentals and have more than doubled in 2021. Year-to-Date Price Performance Image Source: Zacks Investment Research
ON Semiconductor's ( ON Quick Quote ON - Free Report) shares have returned 113.2% on a year-to-date basis. The company is riding on the strengthening demand for power and sensing products in the automotive and industrial end markets. Further, it is continuously gaining traction among electric vehicle manufacturers for silicon carbide and insulated-gate bipolar transistor-based products. Solid demand for high-end graphic cards, which is driving computing growth, remains another tailwind. The Zacks Rank #1 (Strong Buy) company, which is an original equipment manufacturer of a broad range of discrete and embedded semiconductor components, is persistently putting strong efforts toward expanding its presence in the automotive end market on the back of its robust intelligent sensing solutions. This remains a major positive. You can see . the complete list of today's Zacks #1 Rank stocks here The Zacks Consensus Estimate for ON Semiconductor’s 2022 earnings has been revised 18.4% upward to $1.84 per share over the past 60 days. Alpha and Omega Semiconductor's ( AOSL Quick Quote AOSL - Free Report) shares have gained 160.1% year to date. The company is banking on the coronavirus pandemic-induced growing sales of gaming, TVs and home appliances, which have been bolstering its presence in the consumer end-market. Growing shipments of AOSL's products required in computing and gaming applications are contributing well to its top-line growth. Further, strengthening momentum across new gaming systems and PC graphics card platforms is aiding the company's multi-socket design wins. The Zacks Rank #1 company, which is a designer, developer and global supplier of a broad range of power semiconductors such as MOSFET, IGBT, IPM and Power IC products, is likely to continue delivering robust performance on the back of increasing uptake of gaming applications, and strong digital power solution offerings. The Zacks Consensus Estimate for Alpha and Omega’s fiscal 2022 earnings has been revised 12.9% upward to $4.11 per share over the past 60 days. NVIDIA's ( NVDA Quick Quote NVDA - Free Report) shares have returned 137% on a year-to-date basis. The company is benefiting from the ongoing work and learn-from-home waves. It is also gaining from strong growth in GeForce desktop and notebook Graphic Processing Units (GPU), which is boosting its gaming revenues. Further, the expansion of NVIDIA GeForce NOW is expected to drive its user base. A surge in Hyperscale demand remains another tailwind for the company's Data Center business. The solid uptake of artificial intelligence-based smart cockpit infotainment solutions remains another positive. The Zacks Rank #2 (Buy) company, which is the worldwide leader in visual computing technologies and the inventor of GPU, remains well-poised to capitalize on the continued recovery in the global automotive production volumes and the ramp-up of self-driving programs. The Zacks Consensus Estimate for NVIDIA’s fiscal 2023 earnings has been revised 9.8% upward to $5.13 per share over the past 60 days. Ambarella's ( AMBA Quick Quote AMBA - Free Report) shares have gained 128.1% year to date. The company is benefiting from the growing demand for its AI vision silicon products. Improving automotive and security camera businesses along with its transition to a video-artificial intelligence platform remain major positives. Additionally, the growing momentum across its high-performance video processing system-on-a-chip (SoC) is contributing well. This Zacks Rank #3 (Hold) company develops video compression and image processing semiconductors that enable high-definition or HD video capture, share and display. The solid momentum across its CV flow SoCs in professional IP cameras across all geographies is likely to continue driving its top-line growth in the near term. The Zacks Consensus Estimate for Ambarella’s fiscal 2023 earnings has been revised 2.2% upward to $1.84 per share over the past 60 days.