In this article, we discuss 10 semiconductor stocks to buy now. If you want to see more stocks in this list, click “This is When You Get Bullish”: 5 Semiconductor Stocks to Buy Now.
Chip shortages have truly wrecked many global industries, which highlights the importance of the semiconductor market. According to a recent report by Deloitte, the global semiconductor chip industry is forecasted to reach approximately $600 billion in 2022. The firm estimated that chip shortages in the last two years resulted in over $500 billion revenue losses worldwide in the semiconductor and related industries. The automobile sector reported lost revenue of more than $210 billion in 2021 owing to chip shortages.
Semiconductor Market Outlook 2022
The 17th annual KPMG Global Semiconductor Industry Outlook, which comprises a survey of 152 industry professionals, suggests that the semiconductor space remains highly confident in 2022. 95% of the professionals from the survey expect their company revenues to expand, with 68% predicting that they will grow by 11% or more. About 88% of the sample reinforced the idea of a higher capital spending and increasing workforces.
Jenny Harrington, the chief executive officer of Gilman Hill Asset Management, joined CNBC’s ‘Halftime Report’ on July 7 to discuss the semiconductor industry and her current stance on the market. Also in conversation were three other prominent money managers – Josh Brown, Steve Weiss, and Jon Najarian.
According to Jenny Harrington, who owns positions in Applied Materials, Inc. (NASDAQ:AMAT), Teradyne, Inc. (NASDAQ:TER), and Intel Corporation (NASDAQ:INTC), getting bearish on semiconductors now is the wrong move, even as there seems to be potential for companies lowering their guidance for the second half of 2022 and analysts downgrading prominent market names. She believes semis like Intel Corporation (NASDAQ:INTC) and NVIDIA Corporation (NASDAQ:NVDA) are already down about 30% and 50% YTD respectively, and shorting these already beaten down stocks is way too risky.
“This is When You Get Bullish”
Harrington said buying Teradyne and Applied Materials exposes investors to the broader semiconductor market, and they do not need to purchase more expensive names like NVIDIA Corporation (NASDAQ:NVDA) in that case. She sees double digit growth for Teradyne and Applied Materials at an attractive valuation. She believes despite the stock prices taking a beating, these market players are great companies, with valuable prospects and they are trading at correct valuations. She closed her argument saying that the battered stock market is the right time to buy semis, stressing “this is when you get bullish”.
Some of the most notable semiconductor stocks to buy now include Broadcom Inc. (NASDAQ:AVGO), Advanced Micro Devices, Inc. (NASDAQ:AMD), and NVIDIA Corporation (NASDAQ:NVDA).
Photo by Umberto on Unsplash
Our Methodology
After a thorough assessment of the semiconductor industry, we picked stocks that have received positive analyst ratings recently. These companies are robust market candidates and also display strong hedge fund sentiment as of the first quarter of 2022.
10. Teradyne, Inc. (NASDAQ:TER)
Number of Hedge Fund Holders: 33
Teradyne, Inc. (NASDAQ:TER) is a Massachusetts-based company that manufactures and sells automatic test equipment, operating through Semiconductor Test, System Test, Industrial Automation, and Wireless Test segments. On May 13, the company declared a quarterly dividend of $0.11 per share, in line with previous. The dividend was paid to shareholders on June 17.
JPMorgan analyst Samik Chatterjee on July 5 initiated coverage of Teradyne, Inc. (NASDAQ:TER) with a Neutral rating and a $120 price target. Although the analyst sees solid growth prospects and thinks Teradyne, Inc. (NASDAQ:TER) has a robust position in the semiconductor testing industry, he said this is somewhat negated by a rich valuation and “the cyclicality introduced by timing of adoption of new architectures by a concentrated customer footprint”.
According to Insider Monkey’s Q1 data, 33 hedge funds were bullish on Teradyne, Inc. (NASDAQ:TER), compared to 40 funds in the preceding quarter. Alkeon Capital Management is the leading shareholder of the company, with approximately 3.5 million shares worth roughly $4.3 million.
In addition to Broadcom Inc. (NASDAQ:AVGO), Advanced Micro Devices, Inc. (NASDAQ:AMD), and NVIDIA Corporation (NASDAQ:NVDA), Teradyne, Inc. (NASDAQ:TER) is on the radar of elite hedge funds as a potential semiconductor play.
Here is what Carillon Clarivest Capital Appreciation Fund has to say about Teradyne, Inc. (NASDAQ:TER) in its Q1 2022 investor letter:
“Stock selection contributed the most while sector allocation was also positive. An underweight to communication services and an overweight to energy helped performance, while an underweight to consumer staples and an overweight to materials detracted. Stock selection was strong within healthcare and materials but was weak within information technology and industrials. Teradyne (NASDAQ:TER) develops and sells self-automatic test systems. The company gave a weak outlook as a major customer slowed its 3-nanometer technology transition. The Fund sold the stock.”
9. NXP Semiconductors N.V. (NASDAQ:NXPI)
Number of Hedge Fund Holders: 43
NXP Semiconductors N.V. (NASDAQ:NXPI) is a Netherlands-based company that provides semiconductor products such as microcontrollers, application processors, communication processors, wireless connectivity solutions, analog and interface devices, radio frequency power amplifiers, and semiconductor-based environmental and inertial sensors. On June 9, NXP Semiconductors N.V. (NASDAQ:NXPI) stock gained 8.2% on a report that Samsung Electronics plans to acquire the semiconductor firm.
On June 29, BofA analyst Vivek Arya reiterated a Buy rating on NXP Semiconductors N.V. (NASDAQ:NXPI) but lowered the price target on NXP Semiconductors N.V. (NASDAQ:NXPI) to $190 from $220. He slashed his 2022 semiconductor sales forecast to $608 billion and 2023 forecast to $604 billion. Similarly, Barclays analyst Blayne Curtis on June 21 maintained an Overweight rating on NXP Semiconductors N.V. (NASDAQ:NXPI) and reduced the price target on the stock to $200 from $220. According to the analyst, the company faces “strong secular tailwinds”, specifically in auto, but cyclical and macro headwinds “will prove more than just a soft landing”. He believes that NXP Semiconductors N.V. (NASDAQ:NXPI) is “still worth adding to the shopping list for better days”.
Among the hedge funds tracked by Insider Monkey, 43 funds were bullish on NXP Semiconductors N.V. (NASDAQ:NXPI) at the end of Q1 2022, compared to 44 funds in the last quarter. Ken Fisher’s Fisher Asset Management is the leading shareholder of the company, with 923,855 shares worth approximately $171 million.
Here is what Sound Shore Fund has to say about NXP Semiconductors N.V. (NASDAQ:NXPI) in its Q1 2022 investor letter:
“Similarly, analog chip supplier NXP Semiconductors declined even though the company reported above consensus revenue growth. A leading chip maker for infrastructure and automotive applications, we view NXP 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. ON Semiconductor Corporation (NASDAQ:ON)
Number of Hedge Fund Holders: 48
ON Semiconductor Corporation (NASDAQ:ON) was incorporated in 1992 and is headquartered in Phoenix, Arizona. The company specializes in intelligent sensing and power solutions. It offers semiconductor products that perform several application functions such as power switching and conversion, signal conditioning, circuit protection, signal amplification, and voltage regulation. On June 3, ON Semiconductor Corporation (NASDAQ:ON) moved up on the S&P 500 Index, gaining 6.5% after market close.
On July 8, Susquehanna analyst Christopher Rolland told investors that ON Semiconductor Corporation (NASDAQ:ON) is rapidly becoming a strong second-order play on Tesla, Inc. (NASDAQ:TSLA)’s unit growth, specially as online buzz increases around a likely Silicon Carbide (SiC) win at Tesla. The analyst said that this would be a significant achievement for ON Semiconductor Corporation (NASDAQ:ON), with robust top-line and margin growth due to the vertical integration for the product line. The analyst reaffirmed a Positive rating and a $77 price target on ON Semiconductor Corporation (NASDAQ:ON) shares. Previously, on June 29, BofA analyst Vivek Arya maintained a Buy rating on the stock but cut the price target to $65 from $80.
Among the hedge funds tracked by Insider Monkey, 48 funds reported owning stakes in ON Semiconductor Corporation (NASDAQ:ON) at the conclusion of Q1 2022, up from 47 funds in the prior quarter. Jeffrey Smith’s Starboard Value LP is the leading shareholder of the company, with 6.6 million shares worth $414.3 million.
Here is what Artisan Mid Cap Fund has to say about ON Semiconductor Corporation (NASDAQ:ON) in its Q4 2021 investor letter:
“ON Semiconductor is a global supplier of advanced semiconductors for sophisticated electronics applications within the automotive, industrial, communications, consumer and computing end-product markets. The company operates across three segments: power solutions, advanced solutions and intelligent sensing. A new management team, which took over toward the end of 2020, is working to dramatically improve the company’s performance by rightsizing its manufacturing footprint, exiting more commoditized products and investing in several compelling growth opportunities. When the dust has settled, we expect the portfolio to be more focused on the auto and industrial segments. As auto OEMs incorporate more automated safety technology and car fleets transition from internal combustion engines to battery electric vehicles, ON’s image sensors for cars and silicon carbide inverters— which extend EV battery efficiency—will be in high demand. This mix shift should drive ON’s margins higher over time. With shares trading at an attractive valuation, we initiated a GardenSM position.”
7. Marvell Technology, Inc. (NASDAQ:MRVL)
Number of Hedge Fund Holders: 63
Marvell Technology, Inc. (NASDAQ:MRVL) is a Delaware-based company that produces semiconductors and related technology, including analog, mixed-signal, digital signal processing, embedded, and standalone integrated circuits. In Q1 2022, 63 hedge funds were long Marvell Technology, Inc. (NASDAQ:MRVL), with collective stakes worth $2.40 billion, up from 60 funds in the prior quarter, holding stakes in the company valued at $2.5 billion.
BofA analyst Vivek Arya on June 29 reiterated a Buy rating on Marvell Technology, Inc. (NASDAQ:MRVL) but lowered the price target on the shares to $60 from $90. As per the analyst, semiconductor downturns occur every three or four years, and “we could be due for another one”. However, unit weakness “could be cushioned by richer non-consumer mix, robust pricing, expanding content, and constrained supply”, added the analyst.
Among the hedge funds tracked by Insider Monkey, Alex Sacerdote’s Whale Rock Capital Management held the largest position in Marvell Technology, Inc. (NASDAQ:MRVL) during the first quarter of 2022, comprising 3.8 million shares worth about $275 million.
In addition to Broadcom Inc. (NASDAQ:AVGO), Advanced Micro Devices, Inc. (NASDAQ:AMD), and NVIDIA Corporation (NASDAQ:NVDA), smart investors are monitoring Marvell Technology, Inc. (NASDAQ:MRVL).
Here is what ClearBridge Investments Mid Cap Growth Strategy has to say about Marvell Technology, Inc. (NASDAQ:MRVL) in its Q4 2021 investor letter:
“The ClearBridge Mid Cap Growth Strategy continued to deliver strong absolute and relative returns as our focus on de-risking investments prior to purchase and managing position sizes has made a difference through recent market turbulence. Marvell Technology, a leader in semiconductor manufacturing, is in the second-largest position in the Strategy but just one of three stocks with a weighting of over 3% in a diversified growth portfolio of over 70 names. With a wide range of exposure to fast-growing IT subsectors, including 5G telecommunications, data centers, cloud computing, and electric vehicles, Marvell’s ability to secure a crucial supplier position at the nexus of these technologies leaves it well-positioned to participate in their long-term growth. Strength in companies like Marvell offset weakness in higher multiple growth names that were dragged down by negative sentiment or short-term execution issues.”
6. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 71
Broadcom Inc. (NASDAQ:AVGO) is a California-based company that manufactures semiconductor devices and analog III-V based products, distributing them worldwide. BofA analyst Vivek Arya assigned a Buy rating to Broadcom Inc. (NASDAQ:AVGO) on June 29 but lowered the price target on the shares to $625 from $780, citing demand pressure in the second half of 2022 and 2023. However, pricing power and supply chain constraints should support the stock, added the analyst.
Broadcom Inc. (NASDAQ:AVGO) has raised its dividend for 11 years consecutively. The company’s total returns over these years have outperformed the dividend growth and total return performance of the S&P 500 Index. Broadcom Inc. (NASDAQ:AVGO) declared a $4.10 per share quarterly dividend on May 26, which was distributed to shareholders on June 30.
According to Insider Monkey’s database, 71 hedge funds reported bullish positions in Broadcom Inc. (NASDAQ:AVGO) at the end of the first quarter of 2022, up from 62 funds in the preceding quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP featured as a prominent shareholder of the company, with 886,580 shares worth $558.25 million.
Here is what ClearBridge Investments Sustainability Leaders Strategy has to say about Broadcom Inc. (NASDAQ:AVGO) in its Q4 2021 investor letter:
“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 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 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.”
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Disclosure: None. “This is When You Get Bullish”: 10 Semiconductor Stocks to Buy Now is originally published on Insider Monkey.
