In this piece, we will take a look at the 13 best semiconductor stocks to buy now. If you want to skip the details and jump ahead to the top five stocks in this list, then take a look at the 5 Best Semiconductor Stocks to Buy Now.
The high technology sector is a double edged sword, as has become evident throughout the course of this year. During times of strong economic growth, technology firms tend to do well, but as soon as clouds start to form, the sector starts to lose its shine. However, within the technology sector, there are some industries that will grow in spite of moderate near term headwinds simply due to their nature.
One such sector is the semiconductor industry, which has come to the forefront of the investment world of late. These firms are responsible for designing and manufacturing and supplying the products that allow for the designing and manufacturing, of semiconductors – the formal term for a chip used inside every gadget, whether a laptop or a smartphone.
Market research reports attest to the strength of the chip sector, with one report from Fortune Business Insights estimating that the industry was worth $527 billion last year. From then until 2029 it is expected to grow to a whopping $1.3 trillion at a compounded annual growth rate (CAGR) of 12.2%. Driving this growth will be the higher demand for consumer electronics, and developing countries needing more integrated circuits (ICs or processors) to fuel economic growth believes the research firm.
Another report, this time from SpendEdge, takes a look at the semiconductor procurement and spending from large and small companies and estimates that over the course of the next five years, firms will increase their spending at a 6.81% CAGR for a $172 billion spend. It adds that as new semiconductor equipment suppliers enter the market, the overall bargaining power of the supplier is set to drop – which in turn will result in lower prices for the buyers.
Finally, Expert Market Research has a CAGR of 8% for the sector during the time periods between 2022 to 2027. Its research estimates that the semiconductor sector was worth $556 billion in 2021, and through the aforementioned growth rate, it will have a value of $900 billion by 2027 end.
Therefore, despite the recent shocks to major stock market indexes, the future appears to be bright for the chip sector. In our piece, some firms might catch your attention, such as Advanced Micro Devices, Inc. (NASDAQ:AMD), Alphabet Inc. (NASDASQ:GOOGL), and Amazon.com, Inc. (NASDAQ:AMZN).
Photo by Slejven Djurakovic on Unsplash
Our Methodology
To compile our list we took a broad look at the semiconductor industry to determine which trends are shaping the sector. Then, we selected companies that are riding these waves and proceeded to rank them through Insider Monkey’s 895 hedge fund survey for the second quarter of this year.
Best Semiconductor Stocks to Buy Now
13. United Microelectronics Corporation (NYSE:UMC)
Number of Hedge Fund Holders: 13
United Microelectronics Corporation (NYSE:UMC) is a Taiwanese contract semiconductor manufacturer. The firm takes orders from chip design companies and then manufactures them with its machines. It is headquartered in Hsinchu, Taiwan.
United Microelectronics Corporation (NYSE:UMC) is the second largest chip manufacturer operating out of Taiwan, which makes it a crucial player in the industry. It grew its revenues by a strong 22% last year, on the back of rising demand for mature process semiconductors – which are used mostly in China for a wide variety of needs. It also counts some of the world’s largest companies as its customers, such as the San Diego, California chip designer QUALCOMM Incorporated (NASDAQ:QCOM). In August 2022, the company’s sales grew by 35% annually, even as investment banks feared a slowdown in the demand for mature products.
Insider Monkey’s Q2 2022 survey of 895 hedge funds saw 13 as having bought the company’s shares.
Out of these, United Microelectronics Corporation (NYSE:UMC)’s largest investor is Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital which owns 72 million shares that are worth $72 million.
Along with Alphabet Inc. (NASDASQ:GOOGL), Advanced Micro Devices, Inc. (NASDAQ:AMD), and Amazon.com, Inc. (NASDAQ:AMZN), United Microelectronics Corporation (NYSE:UMC) is a hot chip stock.
12. ASML Holding N.V. (NASDAQ:ASML)
Number of Hedge Fund Holders: 47
ASML Holding N.V. (NASDAQ:ASML) is the only company in the world that is capable of manufacturing high end machines that are used by chip manufacturers to print semiconductors. It is headquartered in Veldhoven, Netherlands.
ASML Holding N.V. (NASDAQ:ASML) holds a monopoly in its market since it is the only firm globally capable of manufacturing advanced chipmaking machines that use extreme ultraviolet (EUV) light to manufacture chips. This lends it a near continuous demand, and the next generation EUV machines dubbed High NA will be acquired by chip giant Intel Corporation (NASDAQ:INTC) and the Taiwan Semiconductor Manufacturing Company (NYSE:TSM) over the course of the next two to four years – ensuring that ASML’s plants are kept busy. The EUV systems accounted for 48% of the firm’s revenue in its second quarter of 2022.
UBS raised ASML Holding N.V. (NASDAQ:ASML)’s share price target to EUR 665 from EUR 630 in August 2022, as it shared that the firm remains attractive in an uncertain macroeconomic environment. 47 out of the 895 hedge funds polled by Insider Monkey for their June quarter of 2022 holdings had held a stake in the company.
Ken Fisher’s Fisher Asset Management is ASML Holding N.V. (NASDAQ:ASML)’s largest investor. It owns 4.5 million shares that are worth $2 billion.
11. Lam Research Corporation (NASDAQ:LRCX)
Number of Hedge Fund Holders: 56
Lam Research Corporation (NASDAQ:LRCX) is an American company that sells and maintains chip fabrication equipment. Its machines allow chipmakers to carry several complex stages in chip manufacturing that involve depositing atoms and joining small wires together. The firm is headquartered in Fremont, California.
Lam Research Corporation (NASDAQ:LRCX) is busy diversifying its revenues away from the memory segment, which has seen the company’s revenues drop due to a downturn in memory demand globally. This has started to yield results, as its revenues from the logic segment grew at a whopping 273% during the fourth quarter of its fiscal year 2022. The company also pays a $1.72 dividend for a 1.64% yield.
Wells Fargo raised Lam Research Corporation (NASDAQ:LRCX)’s share price target to $475 from $460 in July 2022, stating that supply chain constraints are improving. Insider Monkey scanned 895 hedge fund portfolios for this year’s second quarter to discover that 56 had bought the company’s shares.
Lam Research Corporation (NASDAQ:LRCX)’s largest investor is Ken Fisher’s Fisher Asset Management which owns 1.9 million shares that are worth $849 million.
10. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders: 65
Intel Corporation (NASDAQ:INTC) is one of the largest and oldest chip manufacturing companies in the world. Headquartered in Santa Clara, California, the United States, the company is responsible for manufacturing central processing units (CPUs) for both consumers and professional users.
Intel Corporation (NASDAQ:INTC) is currently in the middle of a strong attempt to regain chip manufacturing process leadership. After having dithered for years, the firm is investing heavily in capacity and tailoring plans that let it invest only when it has the orders for products in place. Additionally, the freshly passed CHIPS for America Act by the U.S. Congress is slated to increase Intel Corporation (NASDAQ:INTC)’s terminal growth rate and annual return, as it secures funding for expensive plants at a crucial phase in the semiconductor industry.
Deutsche Bank reduced Intel Corporation (NASDAQ:INTC)’s share price target to $35 from $38 in September 2022, as the company guided weak revenues for its current quarter. 65 out of the 895 hedge funds polled by Insider Monkey for their Q2 2022 holdings had invested in the company.
David Blood and Al Gore’s Generation Investment Management is Intel Corporation (NASDAQ:INTC)’s largest investor. It holds a $552 million stake that comes through 14.7 million shares.
This strong analyst and hedge fund sentiment makes Intel one of the best semiconductor stocks to buy for the long term.
Baron Funds mentioned the company in its Q2 2022 investor letter and stated that:
“Then, there is the case of Intel Corporation (NASDAQ:INTC). A blue-chip tech champion with a market capitalization of over $500 billion in early 2000, the stock was trading at a P/E multiple of 42. It was a fast-growing company whose stock price and multiple declined more or less in line with its peers. However, unlike Google, Intel’s net income has grown from $7.3 billion in 1999 to $19.9 billion in 2021, a compounded annual growth rate of just 4.7%. Its growth from the dot com era has not proven to be durable, and Intel has yet to trade at the price it attained in 1999.”
9. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 66
Broadcom Inc. (NASDAQ:AVGO) is a semiconductor company that focuses on providing products that are used in communications devices. These include modems, signal processors, and others. It is headquartered in San Jose, California, the United States.
Broadcom Inc. (NASDAQ:AVGO) is one of the strongest chip companies in the industry when it comes to free cash flows. The firm has grown its FCFs during its fiscal year 2022, with the latest quarter showing 26% growth. Additionally, at a time when big chip firms were struggling, Broadcom Inc. (NASDAQ:AVGO) grew its semiconductor revenue by 32% during its second fiscal quarter. Healthy cash flows also allow for healthy dividends, and the firm pays a $4 dividend for a 3.26% yield.
Truist lowered Broadcom Inc. (NASDAQ:AVGO)’s share price target to $630 from $658 in September 2022 but kept a Buy rating on the shares as it encouraged investors to chase the firm’s strong dividend yield. Insider Monkey’s 2022 June quarter poll of 895 hedge funds saw 66 as having invested in the firm.
Broadcom Inc. (NASDAQ:AVGO)’s largest investor is Ken Fisher’s Fisher Asset Management which owns 1.4 million shares that are worth $716 million.
8. Applied Materials, Inc. (NASDASQ:AMAT)
Number of Hedge Fund Holders: 67
Applied Materials, Inc. (NASDASQ:AMAT) is a semiconductor manufacturing equipment provider headquartered in Santa Clara, California. The firm’s products allow chipmakers to carry out complex chipmaking processes such as vapor and ionic deposition, and etching and removal.
Applied Materials, Inc. (NASDASQ:AMAT) is the market leader in physical and atomic deposition techniques, and these are growing in importance in the chip market as manufacturers turn towards advanced technologies that require shorter wires to link components in a semiconductor package. Applied Materials, Inc. (NASDASQ:AMAT) also has one of the highest returns on equity (ROE) in the industry, which sits at 55.5% and its return on invested capital (ROIC) is also an impressive 39.1%. It also pays a 26 cent dividend for a 1.15% yield.
BofA raised Applied Materials, Inc. (NASDASQ:AMAT)’s share price target to $125 from $118 in September 2022 outlining that the firm has a strong outlook despite the turbulent economic environment. Insider Monkey studied 895 hedge fund portfolios for their Q2 2022 holdings and found out that 67 had invested in the company.
Applied Materials, Inc. (NASDASQ:AMAT)’s largest investor is David Blood and Al Gore’s Generation Investment Management which owns 6 million shares that are worth $555 million.
7. Micron Technology, Inc. (NASDAQ:MU)
Number of Hedge Fund Holders: 69
Micron Technology, Inc. (NASDAQ:MU) is a semiconductor company that manufactures and sells memory and storage products. These products are used in a wide variety of applications such as smartphones, laptops, and data centers. It is headquartered in Boise, Idaho, the United States.
Micron Technology, Inc. (NASDAQ:MU) is one of the most solidly grounded semiconductor firms out there, as seen through its Altman-Z score of 8.24. This is nearly a new record for the company despite the cyclicality of the memory business which has seen its revenues drop. Additionally, the firm’s forward price to earnings ratio of 6.9x is lower than the historical ratio of 12.5x, indicating that there is plenty of room left for growth. MU ranks 7th in our list of the best semiconductor stocks to buy now.
BNP Paribas set a $75 price target for the company in September 2022, outlining that Micron Technology, Inc. (NASDAQ:MU)’s process technology leadership gives it an advantage when recovering from the memory downturn. 69 of the 895 hedge funds part of Insider Monkey’s Q2 2022 survey had bought the company’s shares.
Micron Technology, Inc. (NASDAQ:MU)’s largest investor is David Goel and Paul Ferri’s Matrix Capital Management which owns 4 million shares that are worth $221 million.
6. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 71
QUALCOMM Incorporated (NASDAQ:QCOM) is one of the largest semiconductor designers in the world. Its processors power the majority of Android smartphones in circulation, and the firm also sells smartphone modems, processors for connected vehicles, and other products. It is headquartered in San Diego, California, the United States.
QUALCOMM Incorporated (NASDAQ:QCOM)’s revenues grew by 36% annually during its latest fiscal quarter, with its semiconductor segment posting 45% growth during the same time period. This in turn enabled the company’s operating income to double to $4.5 billion during the quarter. The company’s ROIC of 74.6% sits above its cost of capital of 9.4%, for a large economic spread. QUALCOMM Incorporated (NASDAQ:QCOM) also pays a 75 cent dividend for a 2.4% yield.
71 of the 895 hedge funds part of Insider Monkey’s survey for this year’s second quarter had held a stake in the company.
Panayotis Takis Sparaggis’s Alkeon Capital Management is QUALCOMM Incorporated (NASDAQ:QCOM)’s largest investor. It owns 4.2 million shares that are worth $541 million.
QUALCOMM Incorporated (NASDAQ:QCOM) joins Advanced Micro Devices, Inc. (NASDAQ:AMD), Alphabet Inc. (NASDASQ:GOOGL), and Amazon.com, Inc. (NASDAQ:AMZN) in our list of best semiconductor stocks.
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Disclosure: None. 13 Best Semiconductor Stocks to Buy Now is originally published on Insider Monkey.
