The global semiconductor industry, which plays a key role in the high-growth technology space, has been relatively less affected by the coronavirus pandemic.
With the reopening of the economy, rebound in smartphone sales in markets like China and people spending more time on mobile phones, the semiconductor industry is expected to benefit in the near term.
According to World Semiconductor Trade Statistics, annual global semiconductor sales are expected to grow 5.9% in 2020 and 6.3% in 2021.
Let’s dig deeper to understand what makes the semiconductor space fundamentally attractive.
What Makes Semiconductor Stocks Promising Bets ?
The recent demand trend has spurred chip demand from PC manufacturers and data-center operators.
Growing demand for hardware that facilitates the work-from-home setting is a key catalyst. There has also been an increase in the demand for cloud storage. Data-center operators had to enhance their capacities to accommodate the demand spike for cloud services. The companies that provide design and other components for chip making are expected to benefit from this trend.
Additionally, growing adoption of IoTs, smartphones, storage solutions, networking and connectivity solutions — including Wi-Fi as well as Wi-Fi/Bluetooth integrated SOCs — and the need for high-speed data in both communications networks and data centers bode well for industry participants.
The increase in demand for higher speed will result in accelerated deployment of 5G technology, which promises far more speed than the current 4G LTE due to low latency. Further, 5G adoption beyond mobile is likely to boost demand for memory and storage, particularly in IoT devices, wireless infrastructure and data centers.
This apart, blockchain, IoT, autonomous vehicles, AR/VR and wearables are other growth areas.
Stocks in Focus
Here, we present four semiconductor stocks that are well poised to benefit from this space’s solid prospects.
Rambus ( RMBS Quick Quote RMBS - Free Report) has been gaining from the growing traction in tokenization solutions. In addition to mobile payments and retail, the company has expanded tokenization offerings inmarkets like account-based payments, e-commerce and blockchain. Rambus has also rolled out Vaultify Trade that provides bank-grade tokenization for blockchain.
Per a recent report by MarketsandMarkets, the overall smart ticketing market is expected to reach $20.4 billion by 2023 at a CAGR of 14.99% during the 2018-2023 period. This is an encouraging projection for the company.
The stock, which currently sports a Zacks Rank #1 (Strong Buy), has a Growth Score of B. The long-term projected EPS growth rate for this company is 15%.
Rambus, Inc. Price and Consensus
Micron Technology, Inc.’s ( MU Quick Quote MU - Free Report) prospects look promising. The company is gaining from strong demand for memory chips from personal computer manufacturers and datacenter operators, which is a big positive. With the majority of employees working from home, and students relying on desktops and laptops to study from home amid the pandemic-triggered lockdown, demand for home office equipment got a boost.
Looking ahead, Micron is set to gain from the revival in demand for DRAM, supported by progress in customer inventory adjustments in the cloud, graphics and personal computer markets. The company offers NAND products. NAND flash chips are used extensively in smartphones and solid-state hard drives. The demand for DRAM and NAND memory chips has driven Micron’s top and bottom lines. The company is focusing on improving the cost structure and raising the mix of high-value solutions in its portfolio, which could push margins higher.
This Zacks Rank #2 (Buy) company has a Growth Score of B. The long-term projected EPS growth rate for this company is 10.3%.
Micron Technology, Inc. Price and Consensus
NeoPhotonics Corporation (( NPTN Quick Quote NPTN - Free Report) ) is engaged in the design and manufacture of photonic integrated circuit-based modules and subsystems for bandwidth-intensive, high-speed communications networks.
The company helps to support the fast transmission of data for cloud computing, data centers, and telecom networks. Its products namely ultra-narrow linewidth lasers, high baud rate coherent components and Coherent pluggable DCO modules are being adopted widely.
This Zacks Rank #1 company has a Growth Score of A. The long-term projected EPS growth rate for this company is 15%.
NeoPhotonics Corporation Price and Consensus
NVIDIA ( NVDA Quick Quote NVDA - Free Report) is anticipated to keep benefiting from solid demand for graphics processing units (GPUs) in gaming desktops and notebooks. The company’s advanced graphics cards have become very popular recently, thanks to the strong rise in e-sports players and PC gamers, as well as more spending on gaming graphics processing units.
In addition, its Turing GPU and real-time ray tracing technology are witnessing increased adoption.The company’s strong presence in the datacenters market is a boon for the tech giant in the current scenario, as more businesses are shifting to cloud. This has led to a spike in demand for GPUs, which will bode well for NVIDIA.
The company currently has a Zacks Rank #2. The long-term projected EPS growth rate for this company is 16.9%.
NVIDIA Corporation Price and Consensus
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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