Are These Top Semiconductor Stocks Ready For Big Growth?
Semiconductor stocks have been the backbone of the technology industry this year. During the onset of the coronavirus pandemic, most semiconductor stocks took a dive. This was as most investors were expecting a significant decline in economic activities. Therefore, killing demand in the global semiconductor market. But that didn’t happen. Instead, the PHLX Semiconductor Index, a cap-weighted basket of semiconductor stocks, is 50% higher from its March low.
We have been seeing the rise of cloud stocks and tech stocks in the stock market. This led investors to think about what the next best stocks to buy are. When cloud and tech stocks have appeared to reach the peak of their valuation, could semiconductor stocks be the next best growth story in the second half of 2020? The chip behemoth, Intel (INTC Stock Report) reported that the company’s 7-nanometer processors would be delayed by approximately 6 months. This sent the stock plunging by almost 20%. Apple (AAPL Stock Report) ditching the chip giant seems to be upsetting some investors too. However, investors should also know the fact that Intel owns over 95% of the data center CPU market. Its data center business grew revenues by 40% last quarter.
The big rally in the semiconductor stocks is likely here to stay. This is considering the strong demand from the gaming, AI, cloud and 5G related applications. Many top semiconductor stocks are expected to benefit from secular tailwinds. With that in mind, let’s take a closer look at the top semiconductor stocks to buy in anticipation of stronger demand from tech companies.
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Top Semiconductor Stocks To Buy Now: Taiwan Semiconductor Manufacturing Company
At more than $380 in market value, Taiwan Semiconductor Manufacturing Company (TSM Stock Report) is among the world’s top 10 biggest stocks after a strong rally this year. The recent surge in TSM stock is likely in response to Intel’s disclosure that the 7nm manufacturing process would be delayed. Intel has been having execution problems for years, and Intel’s losses are other chipmakers’ gains.
Unlike Intel, TSM mostly manufactures and sells circuits and other components based on third-party designs or creates chips for lower-profile consumer electronics. The sheer scale of the company’s operations really adds up as it serves various sectors globally. When most stocks took a beating this year, TSM stock grew by double-digit percentages. Now, Intel’s delays didn’t matter that much until Advanced Micro Devices (AMD Stock Report) staged a comeback with their Ryzen PC chips and EPYC server chips. That said, Intel’s problems on the manufacturing front means it will be harder to prevent companies like AMD from grabbing a larger piece of the pie. And because AMD relies on TSM to manufacture its processors, AMD’s success is TSM’s success. Both AMD and TSM stocks are likely to march higher in the foreseeable future. This makes them the top semiconductor stocks to buy right now.
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Top Semiconductor Stocks To Buy Now: NVIDIA
The world’s top GPU maker NVIDIA (NVDA Stock Report) is mulling a potential acquisition of SoftBank’s ARM. NVIDIA is best known for making super powerful GPUs that almost single-handedly drive the gaming industry. We know the gaming industry has been growing at an epic scale. And so is the company that is powering it. While some investors may like the idea of this acquisition, investors should always be skeptical about buying in during buyout rumors. After all, this is all just rumors. And like a lot of rumors, this might not even be remotely true.
Should NVDA pull off this acquisition deal successfully, it could pose a threat to other chipmakers such as AMD and Qualcomm (QCOM Stock Report). It’s not surprising that NVDA would be interested in acquiring ARM. First, NVDA would no longer need to pay royalties to ARM. Secondly, this could be a new avenue for NVDA to make a comeback in the smartphone market. And if NVDA really buys ARM, Qualcomm will need to pay NVDA royalties on all its Snapdragon Chips. This potential shift would essentially level the playing field and allow NVDA to compete with QCOM in the mobile market again. Of course, we will have to see how this plays out. With or without the acquisition, NVDA stock still remains one of the best semiconductor stocks to watch for now