Semiconductor sales are making a solid rebound after a dull second half of 2022. Sales have been increasing steadily over the past few months as demand remains high. Although sales are still quite low on a year-over-year basis, the worst seems to be over and the future looks bright.
Moreover, the semiconductor market is projected to grow further in 2024. Given this situation, investing in semiconductor stocks like ON Semiconductor Corporation ON, NVIDIA Corporation NVDA, ACM Research, Inc. ACMR and Lam Research Corporation LRCX would be a prudent choice.
Semiconductor Sales Rebound
Global semiconductor sales totaled $43.2 billion in July, increasing 2.3% month over month from June’s figures of $42.2 billion, according to the latest report from the Semiconductor Industry Association (SIA). This comes after a 1.7% jump in June.
John Neuffer, SIA president and CEO, said, “The global semiconductor market has experienced modest but steady month-to-month growth this year, with sales increasing for the fourth consecutive month in July.”
July’s jump follows a solid second quarter for the semiconductor industry when sales totaled $124.5 billion, up 4.7% from the first quarter.
While sales are still down on a year-over-year basis, industry experts remain optimistic about a market rebound, consistent with earlier predictions. Notably, semiconductor sales have now grown for five consecutive months.
Demand for semiconductors slowed in the latter half of 2022, following robust sales in 2020 and 2021, driven by the remote working trend triggered by the COVID-19 pandemic.
Moreover, this slowdown worsened due to higher prices resulting from the Federal Reserve’s aggressive monetary tightening policies aimed at controlling multi-decade-high inflation.
Additionally, various geopolitical factors and the lingering effects of the pandemic contributed to the decline in sales during the second half of 2022 and the early months of this year.
Nevertheless, as inflation begins to cool further and geopolitical tensions ease, the semiconductor market is expected to receive a significant boost.
Also, the increasing global adoption and widespread use of consumer electronics, coupled with the expanding influence of technologies such as artificial intelligence, the Internet of Things, and machine learning, will continue to be the driving forces behind the demand for semiconductors.
This trend is expected to continue and contribute to sustained demand for semiconductors in the near future.
Our Choices
Given the bright prospects, it would be wise to invest in semiconductor stocks. Below are four chip stocks that investors can gain from in the near term.
ON Semiconductor Corporation is a supplier of broadband and power management integrated circuits and standard semiconductors used in numerous advanced devices ranging from high-speed fiber optic networking equipment to the precise power management functions found in portable electronics. ON’s products provide clock management and data flow management for precision computing and communications systems, and power management for distributing and monitoring the supply of power to different elements within virtually every electronic device.
ON Semiconductor’s expected earnings growth rate for next year is 9%. The Zacks Consensus Estimate for current-year earnings has improved 8% over the past 60 days. ON currently has a Zacks Rank #2 (Buy).
NVIDIA Corporation is the worldwide leader in visual computing technologies and inventor of the graphic processing unit (GPU). Over the years, NVDA’s focus has evolved from PC graphics to AI-based solutions that now support high-performance computing, gaming and virtual reality platforms. NVIDIA’s GPU success can be attributed to its parallel processing capabilities supported by thousands of computing cores, necessary to run deep-learning algorithms.
NVIDIA’s expected earnings growth rate for next year is 48.6%. The Zacks Consensus Estimate for current-year earnings has improved 37.5% over the past 60 days. NVDA presently sports a Zacks Rank #1.
ACM Research, Inc. develops, manufactures and sells single-wafer wet cleaning equipment, which semiconductor manufacturers can use in numerous manufacturing steps to remove particles, contaminants and other random defects. ACMR is headquartered in Fremont, CA.
ACM Research’s expected earnings growth rate for next year is 2.4%. The Zacks Consensus Estimate for current-year earnings has improved 36.3% over the past 60 days. ACMR currently sports a Zacks Rank #1.
Lam Research Corporation supplies wafer fabrication equipment and services to the semiconductor industry. LAM’s products are used by semiconductor manufacturers in front-end and WLP processes, creating memory, microprocessors, and other logic-integrated circuits for a broad range of electronic devices.
Lam Research Corporation’s expected earnings growth rate for next year is 25.2%. The Zacks Consensus Estimate for current-year earnings has improved 8.9% over the past 60 days. LRCX currently carries a Zacks Rank #2.
NVIDIA Corporation (NVDA): Free Stock Analysis Report
Lam Research Corporation (LRCX): Free Stock Analysis Report
ACM Research, Inc. (ACMR): Free Stock Analysis Report
ON Semiconductor Corporation (ON): Free Stock Analysis Report
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