In this article, we discuss the 10 semiconductor stocks to buy on the dip. If you want to read about some more semiconductor stocks to buy on the dip, go directly to 5 Semiconductor Stocks to Buy on the Dip.
Investors are starting to get concerned about chip stocks like NVIDIA Corporation (NASDAQ:NVDA), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), and Intel Corporation (NASDAQ:INTC) in the past few days even as the United States government outlines a plan to spend hundreds of billions on the semiconductor industry through the CHIPS Act. This is because NVIDIA Corporation (NASDAQ:NVDA) recently posted earnings for the second quarter of 2022 in which it missed market estimates on revenue by $400 million.
The company blamed gaming demand for the revenue miss, which came in just a little over $2 billion, down 4% sequentially and 33% year-over-year. Data center revenue, meanwhile, continued to register growth, climbing 61% year-over-year to $3.81 billion. The firm said it has slowed operating expenses during the quarter but would continue with a share buyback program. The weak earnings led to a more than 8% drop in the share price of the firm that has already seen shares plunge by more than 30% so far this year.
The earnings of NVIDIA Corporation (NASDAQ:NVDA) have added to investor concerns about the chip industry but analysts remain bullish about the long-term growth catalysts for the sector. A report by management consulting firm McKinsey has forecast that the chips industry could be worth $1 trillion by the end of this decade. Journalist investor Jim Cramer has also advised investors to buy beaten down chip stocks that are almost certain to provide “growth at a reasonable price” in the present macro environment.
Our Methodology
The chip companies that have registered a more than 10% percentage decline in their share price over the past six months as of August 8 but have the potential to grow in the coming years based on the products or services they offer were selected for the list. In order to provide readers with some context for their investment choices, the business fundamentals and analyst ratings for the stocks are also discussed. Data from around 900 elite hedge funds tracked by Insider Monkey in the first quarter of 2022 was used to identify the number of hedge funds that hold stakes in each firm.
Semiconductor Stocks to Buy on the Dip
10. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 71
Percentage Decline in Share Price Over Past Six Months: 10.76%
Broadcom Inc. (NASDAQ:AVGO) supplies semiconductor infrastructure software solutions. Reports indicate that tech giant Meta Platforms will become the latest addition to the $1 billion-plus ASIC cloud customer base for Broadcom. The chip firm is the largest player in the application-specific integrated circuit cloud business, a step up from the traditional IC chips used by other cloud setups. Broadcom is already partnering with Google to bring a new artificial intelligence chip to the marketplace.
On July 20, Deutsche Bank analyst Ross Seymore maintained a Buy rating on Broadcom Inc. (NASDAQ:AVGO) stock and lowered the price target to $635 from $700, backing the firm to display strength on fundamentals in the ongoing purgatory stage of the chip cycle.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Cantillon Capital Management is a leading shareholder in Broadcom Inc. (NASDAQ:AVGO), with 1 million shares worth more than $652 million.
Just like NVIDIA Corporation (NASDAQ:NVDA), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), and Intel Corporation (NASDAQ:INTC), Broadcom Inc. (NASDAQ:AVGO) is one of the stocks feeling the heat of inflation.
In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Broadcom Inc. (NASDAQ:AVGO) was one of them. Here is what the fund said:
“However, ClearBridge portfolio companies are responding by supporting their workforces and showing resilience in adapting and thriving. Semiconductor companies ClearBridge owns and engages with have been successful in advancing vaccinations in their global supply chains. In Malaysia, for example, Broadcom Inc. (NASDAQ:AVGO) has taken part in PIKAS, a public-private partnership vaccination program focusing on the workforce in critical manufacturing sectors. By the summer of 2021 Broadcom Inc. (NASDAQ:AVGO) was able to get over 90% of workers in its Penang factory at least one dose of vaccine, and roughly 73% fully vaccinated. Companies in the program also pay the administration cost for vaccinations including cases where the employee is no longer employed by the company before full immunization of the employee.”
9. NXP Semiconductors N.V. (NASDAQ:NXPI)
Number of Hedge Fund Holders: 43
Percentage Decline in Share Price Over Past Six Months: 14.21%
NXP Semiconductors N.V. (NASDAQ:NXPI) makes and sells various products related to semiconductors. In late July, the company announced that it was partnering with Taiwan-based electronics firm Foxconn to bring a new generation of connected smart devices to the market. The latter is expected to source automotive technologies and the architectural innovation and platforms for electrification that the former offers for connectivity and safe automated driving as part of the deal.
On July 27, Cowen analyst Matthew Ramsay maintained an Outperform rating on NXP Semiconductors N.V. (NASDAQ:NXPI) stock and raised the price target to $200 from $190, noting that the firm was proactively de-risking its backlog.
Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in NXP Semiconductors N.V. (NASDAQ:NXPI), with 923,855 shares worth more than $170 million.
In its Q1 2022 investor letter, Sound Shore Management, an asset management firm, highlighted a few stocks and NXP Semiconductors N.V. (NASDAQ:NXPI) was one of them. Here is what the fund said:
“Similarly, analog chip supplier NXP Semiconductors N.V. (NASDAQ:NXPI) declined even though the company reported above consensus revenue growth. A leading chip maker for infrastructure and automotive applications, we view NXP Semiconductors N.V. (NASDAQ:NXPI) as a “new industrial,” uniquely positioned to benefit from increased chip content per application/vehicle. This includes electric and autonomous vehicles and more broadly, connectivity and the internet of things. We added the stock to the portfolio during the volatile fourth quarter of 2018 at just 10 times earnings. Today, NXP is still valued at a very reasonable 14 times earnings.”
8. ASML Holding N.V. (NASDAQ:ASML)
Number of Hedge Fund Holders: 46
Percentage Decline in Share Price Over Past Six Months: 15.82%
ASML Holding N.V. (NASDAQ:ASML) makes and sells advanced semiconductor equipment systems. The company is one of the largest suppliers of semiconductor equipment and tools to the chip industry in China, a source of revenue that has come under scrutiny in the past few weeks as the US government pushes the firm towards other markets. One of the cutting edge tech it offers to Chinese firms is extreme ultraviolet lithography systems. The firm recently beat market estimates on revenue for the second quarter of 2022.
On July 21, investment advisory Credit Suisse maintained an Outperform rating on ASML Holding N.V. (NASDAQ:ASML) stock and lowered the price target to EUR 920 from EUR 960. Analyst Adithya Metuku issued the ratings update.
Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in ASML Holding N.V. (NASDAQ: ASML), with 4.4 million shares worth more than $2.9 billion.
In its Q1 2022 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and ASML Holding N.V. (NASDAQ:ASML) was one of them. Here is what the fund said:
“During the quarter, we reduced our semiconductor exposure through the trim of ASML Holding N.V. (NASDAQ:ASML) to manage concerns of a slowdown due to the risk of double ordering and potential softness in some consumer end markets. We increased our position in IT services with the purchase of Accenture as we remain optimistic about the long-term growth potential these companies provide, which is underpinned by the compressed digital transformation cycle, rising cloud adoption and growth in data-driven insights.
Despite the market volatility and hyper focus on rising rates, chief information officer surveys continue to forecast resilience in IT budgets this year. Growth in IT spending for 2022 is expected to remain above the 10-year pre-COVID-19 average, according to Morgan Stanley. We believe this is a result of the strong secular underpinnings brought on by digital transformation and businesses focusing on increasing efficiencies through technology.”
7. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 73
Percentage Decline in Share Price Over Past Six Months: 19.65%
QUALCOMM Incorporated (NASDAQ:QCOM) develops and sells foundational technologies for the wireless industry. On August 8, the company announced that it was extending a deal with chip firm GlobalFoundries, under which the manufacturing agreement between the two parties will be more than doubled. As part of the deal, the latter will expand a facility in New York to meet production demand. The deal focuses on chips for 5G wireless transceivers, Wi-Fi, automotive, and Internet of Things connectivity technologies.
On July 28, Wells Fargo analyst Gary Mobley maintained an Equal Weight rating on QUALCOMM Incorporated (NASDAQ:QCOM) stock and raised the price target to $150 from $135, appreciating the second quarter earnings beat of the firm.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in QUALCOMM Incorporated (NASDAQ:QCOM), with 3.5 million shares worth more than $538 million.
6. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 83
Percentage Decline in Share Price Over Past Six Months: 24.67%
Advanced Micro Devices, Inc. (NASDAQ:AMD) operates as a semiconductor manufacturer. In early June, the company announced that it was partnering with NIO, one of the largest EV makers in China, to supply chips for EVs. As part of the deal, the latter will use the EPYC processors of the former to help improve the performance of the HPC platform in NIO cars. AMD claims the new processors come with enhanced Zen 3 cores with up to 32 MB L3 cache per core, a new cache architecture, and high clock frequency.
On August 3, Northland analyst Gus Richard maintained an Outperform rating on Advanced Micro Devices, Inc. (NASDAQ:AMD) stock and raised the price target to $105 from $95, noting that server market share momentum for the firm will accelerate entering into 2023.
Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Advanced Micro Devices, Inc. (NASDAQ:AMD), with 24 million shares worth more than $2.6 billion.
Just like NVIDIA Corporation (NASDAQ:NVDA), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), and Intel Corporation (NASDAQ:INTC), Advanced Micro Devices, Inc. (NASDAQ:AMD) is one of the stocks that elite investors are monitoring.
Here is what Carillon Tower Advisers had to say about Advanced Micro Devices, Inc. (NASDAQ:AMD) in its fourth-quarter 2021 investor letter:
“Advanced Micro Devices, Inc. (NASDAQ:AMD) supplies semiconductor chips for central processing units (CPUs) and graphic processing units (GPUs). The firm has been gaining share against its primary competitor in the datacenter server CPU space, as this rival has been unable to match the design and manufacturing capabilities of AMD and its partners. Investors are also looking forward to the closing of the previously announced merger with a semiconductor manufacturer that is another one of the portfolio’s holdings. The merger will increase AMD’s capabilities in the Field Programmable Gate Array (FPGA) chip space, and the combined company should possess the potential to win additional market share in the datacenter chip market.”
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Disclosure. None. 10 Semiconductor Stocks to Buy on the Dip is originally published on Insider Monkey.
