Goldman Sachs Semiconductor Stocks: Top 5 Picks

In this article, we discuss the top 5 semiconductor stock picks of Goldman Sachs. If you want to see more stocks in this selection, check out Goldman Sachs Semiconductor Stocks: Top 10 Picks. 

5. Texas Instruments Incorporated (NASDAQ:TXN)

Number of Hedge Fund Holders: 55

Goldman Sachs’ Stake Value: $1,176,598,000

Texas Instruments Incorporated (NASDAQ:TXN) designs, manufactures, and sells semiconductors to electronics designers and manufacturers worldwide. It operates through two segments – Analog and Embedded Processing. On October 25, the company reported a Q3 GAAP EPS of $2.47 and a revenue of $5.24 billion, topping market estimates by $0.08 and $100 million, respectively. 

Texas Instruments Incorporated (NASDAQ:TXN) is one of the top Goldman Sachs semiconductor stocks to monitor. The firm owns 7.65 million shares of Texas Instruments Incorporated (NASDAQ:TXN) worth $1.17 billion as of Q2 2022, representing 0.26% of the total holdings. 

On October 26, Benchmark analyst Cody Acree maintained a Buy rating on Texas Instruments Incorporated (NASDAQ:TXN) but lowered the price target on the shares to $189 from $205 following the company’s Q3 earnings report. He was encouraged by the company’s Q3 revenue and earnings upside, and believes that the conservative Q4 guidance is “prudent and generally as expected by much of the Street.” 

According to Insider Monkey’s data, 55 hedge funds were bullish on Texas Instruments Incorporated (NASDAQ:TXN) at the end of Q2 2022, compared to 46 funds in the last quarter. Jean-Marie Eveillard’s First Eagle Investment Management is the leading position holder in the company, with 3.5 million shares worth $542 million. 

Here is what Davis Opportunity Fund has to say about Texas Instruments Incorporated (NASDAQ:TXN) in its Q4 2021 investor letter:

“Within technology and communication services, we own a number of online businesses and semiconductor related companies, including Alphabet, Amazon, Intel, Applied Materials and Texas Instruments. Within the realm of high technology, we believe that leadership positions reflect enduring and widening competitive advantages over smaller competitors, with few exceptions. This is because online businesses, as well as semiconductor companies, benefit from economies of scale. An online search and advertising engine will, in general, be more profitable per unit of cost as it grows larger in terms of users and advertising dollars. It is a hub-and-spoke model, in other words, where it is generally not necessary to grow expenses at the same rate that revenues grow beyond a certain threshold. Therefore, returns on capital tend to be higher, the larger and more dominant the online search company is.”

4. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)

Number of Hedge Fund Holders: 72

Goldman Sachs’ Stake Value: $1,322,375,000

Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is one of the biggest manufacturers and distributors of integrated circuits and other semiconductor devices worldwide. Goldman Sachs owns 16.17 million shares of Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) as of Q2 2022, worth $1.3 billion and representing 0.29% of the total portfolio. It is one of the most prominent Goldman Sachs semiconductor stocks to watch. 

On October 13, Goldman Sachs analyst Bruce Lu downgraded Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) to Buy from Conviction Buy with a price target of $89, down from $126. The analyst noted that the management has turned “more conservative”, as it has acknowledged the impact from demand weakness, especially for its N7 nodes. TSMC management has also guided down 2022 capex to $36 billion from approximately $40 billion, partially due to uncertain demand, the analyst added.

According to Insider Monkey’s data, 72 hedge funds were long Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) at the end of Q2 2022, compared to 81 funds in the prior quarter. Ken Fisher’s Fisher Asset Management is the leading position holder in the company, with 26.3 million shares worth $2.15 billion. 

Baron Funds made the following comment about Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its Q3 2022 investor letter:

“Semiconductor giant Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) detracted from performance due to the global macroeconomic slowdown and softening demand for consumer electronics. We retain conviction that Taiwan Semi’s technological leadership, pricing power, and exposure to secular growth markets, including high-performance computing, automotive, and IoT, will allow the company to deliver strong revenue growth over the next several years.”

3. MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI)

Number of Hedge Fund Holders: 21

Goldman Sachs’ Stake Value: $1,785,588,000

MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI) is a Massachusetts-based company that designs and manufactures analog semiconductor solutions for use in wireless and wireline applications across the radio frequency, microwave, millimeter wave, and lightwave spectrum worldwide. In Q2 2022, Goldman Sachs held 20.5 million shares of MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI) worth $1.78 billion, representing 0.40% of the total portfolio. 

On November 3, MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI) reported its Q3 results, posting non-GAAP earnings per share of $0.77 and a revenue of $178.1 million, outperforming market estimates by $0.01 and $0.73 million, respectively. For the fiscal first quarter ending December 30, 2022, MACOM expects revenue to be in the range of $177 million to $182 million, versus a consensus of $177.54 million.

Benchmark analyst David Williams on November 7 downgraded MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI) to Hold from Buy and removed his prior price target. While MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI)’s Q4 results and outlook exceeded expectations and he believes Macom’s strategic product positioning and robust underlying secular trends will continue to offer revenue stability through the cycle, he thinks the present share price reflects an “appropriate premium multiple” on his $3.20 FY23 EPS estimate, the analyst told investors.

According to Insider Monkey’s data, 21 hedge funds were long MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI) at the end of June 2022, with combined stakes worth nearly $157 million. D E Shaw is the biggest stakeholder of the company, with 974,141 shares valued at approximately $45 million. 

Here is what Aristotle Capital Management Small Cap Equity has to say about MACOM Technology Solutions Holdings, Inc. (NASDAQ:MTSI) in its Q1 2022 investor letter:

“MACOM Technology Solutions (NASDAQ:MTSI), a designer and manufacturer of high-performance semiconductors, declined in the face of industry-wide supply chain issues. Nevertheless, the company’s fundamentals continue to advance, as we believe the company’s meaningful exposure to growing demand from Data Center and 5G end market applications plus solid company-specific execution has driven faster-than-expected profitability. We believe the underlying demand drivers are sustainable for the foreseeable future and continue to maintain our position.”

2. NVIDIA Corporation (NASDAQ:NVDA)

Number of Hedge Fund Holders: 84

Goldman Sachs’ Stake Value: $2,175,273,000

NVIDIA Corporation (NASDAQ:NVDA) is a California-based company that provides graphics, computing, and networking solutions in the United States, Taiwan, China, and internationally. NVIDIA Corporation (NASDAQ:NVDA) is one of the most notable Goldman Sachs semiconductor stocks to watch. The firm owns 14.3 million shares of NVIDIA worth $2.17 billion as of Q2 2022, representing 0.49% of the total securities. 

On November 8, nNVIDIA Corporation (NASDAQ:NVDA) announced that it has launched a new chip in China that complies with recently introduced U.S. export rules to prevent access to innovative tech. The A800 chip is the first processor of its kind from a U.S. semiconductor maker that adheres to the new trade rules.

Needham analyst Rajvindra Gill on October 25 reiterated a Buy rating on NVIDIA Corporation (NASDAQ:NVDA) but lowered the price target on the shares to $155 from $170 as part of a broader research note on Semiconductors and Semiconductor Equipment.

According to Insider Monkey’s data, 84 hedge funds were bullish on NVIDIA Corporation (NASDAQ:NVDA) at the end of June 2022, compared to 102 funds in the last quarter. Phill Gross and Robert Atchinson’s Adage Capital Management is a prominent position holder in the company, with 2.5 million shares worth about $386 million. 

Vulcan Value Partners made the following comment about NVIDIA Corporation (NASDAQ:NVDA) in its Q3 2022 investor letter:

“We also sold NVIDIA Corporation (NASDAQ:NVDA) during the quarter to allocate capital to new purchases and to add to existing positions in the portfolio. NVIDIA is facing multiple headwinds. Data center revenue growth is slowing, gaming revenue growth is declining, and the United States has issued new export controls to China that impact NVDIA’s products. We believe NVDIA’s competitive advantages are intact, and it remains on our MVP list. In the right circumstances we would be delighted to own it in the future.”

1. ON Semiconductor Corporation (NASDAQ:ON)

Number of Hedge Fund Holders: 39

Goldman Sachs’ Stake Value: $2,345,738,000

ON Semiconductor Corporation (NASDAQ:ON) is an Arizona-based company that provides intelligent sensing and power solutions worldwide. It is one of the premier Goldman Sachs semiconductor stocks to monitor. The firm owns 20.3 million shares of ON Semiconductor Corporation (NASDAQ:ON) worth $2.3 billion as of Q2 2022, representing 0.53% of the total portfolio. 

On November 1, Mizuho analyst Vijay Rakesh maintained a Buy rating on ON Semiconductor Corporation (NASDAQ:ON) but lowered the firm’s price target on the shares to $72 from $79 following the Q3 results. The analyst sees ON Semiconductor Corporation (NASDAQ:ON) as well positioned with SiC capacity continuing to increase, but noted that the short-term gross margin outlook, weak macro environment into 2023, and potential industry pricing are a concern for investors.

Among the hedge funds tracked by Insider Monkey, 39 funds were long ON Semiconductor Corporation (NASDAQ:ON) at the end of June 2022, compared to 48 funds in the prior quarter. Jeffrey Smith’s Starboard Value LP is the largest stakeholder of the company, with 5.6 million shares worth $282.6 million. 

Here is what Artisan Partners specifically said about ON Semiconductor Corporation (NASDAQ:ON) in its Q2 2022 investor letter:

“ON Semiconductor Corporation (NASDAQ:ON) is a global market leader in power management and image sensors. The company reported 49% gross margins in 1Q22 which met the new management team’s 48%-50% long-term target after revising it higher just one quarter ago. We believe ON has a clear path to >50% gross margins, and its financial results reflect the ongoing structural improvements in both manufacturing and products, cost initiatives, product mix and rising prices. Growing demand for chips in electric vehicles, renewable energy infrastructure, advanced driver assistance (multiple cameras), factory automation and machine vision should drive sustainable high single-digit top-line growth. With shares trading at an attractive discount to our PMV estimate, we continued to move this holding up the Crop of the portfolio.”

You can also take a look at 14 Best Growth Stocks To Buy and 10 Most Undervalued Stocks To Buy. 

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