There’s certainly a strong argument for including semiconductor stocks in almost any long-term portfolio, as these companies are poised for unprecedented growth over the next few years. Since the manufacturers and developers of these intricate chips play a critical role in so many different industries, including consumer electronics, communications, healthcare, artificial intelligence, and automotive, adding shares of the top semi names provides exposure to some truly attractive end markets. There’s also a global chip shortage caused by the pandemic that should keep semiconductors in high demand for years to come, which is another great reason to consider adding shares.
While some investors might think that adding any semiconductor stock on the market is a recipe for success, this is simply not the case even with the positive secular trends that are driving the industry's growth. Case in point - take a look at what happened to Intel (NASDAQ:INTC)
after the company’s latest quarterly results disappointed in a big way, as shares declined more than 11% during the trading session following the report.
That’s why we are focusing on 3 super strong semi stocks to buy now to help you identify some of the best options to consider in this exciting area of the tech sector. Let’s take a deeper look below.
Advanced Micro Devices (NASDAQ: AMD)
First up is Advanced Micro Devices, a leading supplier of microprocessors and graphics semiconductors that are used to power computers and consumer electronics. The company also supplies the chips that are used in popular video game consoles like the Microsoft Xbox Series X and Sony Playstation 5, which have been flying off the shelves since they were released last year. Investors should note that Advanced Micro Devices
competes with Intel in the x86-based microprocessors market, which means that Intel’s recent woes are a plus for the company.
AMD has recently been gaining market share from Intel thanks to its innovative chip designs and the fact that it outsources its manufacturing to Taiwan Semiconductor Manufacturing Company, which is a trend that should continue to deliver earnings growth going forward and a strong reason to consider adding shares. The company is also edging closer towards a major acquisition, as AMD is looking to acquire Xilinx in an all-stock transaction valued at $35 billion. The move will expand the company’s data center business and increase AMD’s TAM to $110 billion. Advanced Micro Devices will report its Q3 financial results on October 26th after market close, which could mean another explosive move is on the way for the stock.
With a global chip shortage expected that is expected to last until 2022 or 2023, it makes a lot of sense to take a look at a company like ASML. It’s the world’s second-largest supplier of semiconductor manufacturing equipment, which means the company’s sales are directly benefitting from the current situation. Companies are looking to ASML
to help them expand their production capacity in order to keep up with the massive demand, and this trend should contribute to steady earnings growth over the next few quarters. It’s also worth noting that ASML has pulled back from its recent highs, offering an interesting buy point if the stock can reclaim its 50-day moving average.
ASML recently beat consensus Q3 EPS estimates by $0.35 with EPS of $5.02, and the company’s management confirmed that it expects to achieve its impressive 2021 sales growth target of 35%. Although some supply chain issues might prevent the company from delivering a monster Q4, there’s still plenty to love about the long-term prospects of this leader in photolithography systems that are used to manufacture chips around the world.
It’s always a good idea to take note of the stocks that are the quickest to hit new highs after a market pullback, and NVIDIA is a great example. The company, which develops graphics processing units that are used in end markets like high-end personal computers, data centers, and video games, is perhaps the top dog in semiconductors, evident in the fact that the stock has rallied over 74% year-to-date. While NVIDIA
stock has had quite the run over the last year, there are still several reasons why it might be worth adding at this time.
First, the company’s exposure to artificial intelligence could be a truly monumental opportunity going forward, as NVIDIA’s GPUs could end up changing computing as we know it. There’s also a lot for investors to like about the company’s role in the automotive industry, which includes cockpit infotainment solutions, AV platforms, and even autonomous driving platforms. NVIDIA reported record revenue in Q2 of $6.51 billion, up 68% year-over-year, driven by strength in the company’s gaming and data center segments. It wouldn’t be surprising to see NVIDIA deliver another record quarter in Q3, so look out for the upcoming earnings release on November 17th.
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