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Soaring Demand Driving Microchip Sales: 4 Solid Stocks to Buy
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Soaring demand and acute supply crunch of semiconductors have been hurting several industries but microchip makers have been the biggest gainers. Since the onset of the pandemic, sales of electronic goods have been on the rise, pushing demand for semiconductors.
However, this has turned into a crisis situation for many industries over the past few months, with automobile makers suffering the most. Although chipmakers have been ramping up production and millions of dollars are being pumped into boosting production, the supply crunch is expected to last for months.
Semiconductor sales have soared almost every month over the past couple of years. Thus, major microchip makers like NVIDIA Corporation (NVDA - Free Report) , Microchip Technology (MCHP - Free Report) , ON Semiconductor (ON - Free Report) and STMicroelectronics (STM - Free Report) are likely to benefit in the near term.
Semiconductor Sales Jump in October
The Semiconductor Industry Association (“SIA”) said on Dec 6 that global semiconductor sales totaled $48.8 billion in October compared with $39.4 billion in October 2020. This reflects a jump of 24% year over year. Sales increased 1.1% on a month-over-month basis in October from September’s total of $48.3 billion. October’s gains were driven by higher demand for electronic devices.
Sales rose across all regions in October. On a year-over-year basis microchip sales grew 29.2% in the Americas, 27.3% in Europe and 23.7% in Japan. In the Asia Pacific, sales grew 22.6%, while in China, sales rose 21.1%. Month over month, sales increased 2.6% in the Americas, 2.8% in Europe and 1.1% in Japan.
Semiconductor Industry Poised to Grow
The semiconductor industry has been on a high this year after sales started skyrocketing during the peak of the pandemic. According to an earlier report from the SIA, microchip sales totaled $144.8 billion in the third quarter of 2021, soaring 27.6% year over year and 7.4% from the second quarter.
In the third quarter, the semiconductor industry also achieved a milestone of shipping the highest number of microchips units in the market’s history.
The supply crunch is likely to continue for months given the rising demand demand from various industries including automobiles. According to Deloitte’s Technology, Media & Telecommunications (TMT) 2022 Predictions report, the global semiconductor shortage could last till early 2023.
The crisis will persist despite increased investment to boost production and things will start getting better only by the end of 2022, according to the report. Moreover, venture capital firms will invest over $6 billion in microchip companies in 2022 to boost production.
A separate report from the World Semiconductor Trade Statistics says semiconductor sales will surpass expectations in 2021. According to the WSTS industry’s latest report, global microchip sales will now increase 25.6% in 2021 and 8.8% in 2022.
Our Choices
Given the rising demand for semiconductors and continuing supply crunch, the semiconductor industry is only likely to benefit in the near term. Below are five chip stocks that investors can gain from in the current scenario.
ON Semiconductor Corporation is an original equipment manufacturer of a broad range of discrete and embedded semiconductor components. ON continues to gain traction among electric vehicle manufacturers for silicon carbide and insulated-gate bipolar transistor-based products. ON Semiconductor has a well-diversified business, generating a significant percentage of revenues from each of the computing, consumer, industrial, communications and automotive end markets.
ON Semiconductor’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 12.4% over the past 60 days. Shares of ON have gained 9.4% in the past month. ON Semiconductor holds a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Microchip Technology Incorporated develops and manufactures microcontrollers, memory, and analog and interface products for embedded control systems, which are small, low-power computers designed to perform specific tasks. MCHP reported second-quarter fiscal 2022 earnings of $1.07 per share, beating the Zacks Consensus Estimate of $1.06 per share. Microchip Technology reported revenues of $1.65 billion for the quarter ended September 2021, surpassing the Zacks Consensus Estimate by 0.10%.
Microchip Technology’s expected earnings growth rate for the current year is more than 33.9%. The Zacks Consensus Estimate for current-year earnings has improved 4.5% over the past 60 days. Shares of MCHP have gained 3.8% in the past 30 days. Microchip Technology has a Zacks Rank #2.
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, which are necessary to run deep-learning algorithms.
NVIDIA’s expected earnings growth rate for the current year is 73.2%. The Zacks Consensus Estimate for current-year earnings has improved 4.6% over the past 60 days. Shares of NVDA have gained 3.3% in the past 30 days. NVIDIA carries a Zacks Rank #2.
STMicroelectronics N.V. designs, develops, manufactures and markets a broad range of semiconductor integrated circuits and discrete devices used in a wide variety of microelectronic applications, including telecommunications systems, computer systems, consumer products, automotive products and industrial automation and control systems. STM is currently witnessing very strong demand across most product lines and end markets. This is leading to strong pricing and allowing STMicroelectronicsto operate at full capacity.
STMicroelectronics’expected earnings growth rate for the current year is 65.3%. The Zacks Consensus Estimate for current-year earnings has improved 4.7% over the past 60 days.Shares of STMhave advanced 11% in the past three months. STMicroelectronicscarries a Zacks Rank #2.
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Soaring Demand Driving Microchip Sales: 4 Solid Stocks to Buy
Soaring demand and acute supply crunch of semiconductors have been hurting several industries but microchip makers have been the biggest gainers. Since the onset of the pandemic, sales of electronic goods have been on the rise, pushing demand for semiconductors.
However, this has turned into a crisis situation for many industries over the past few months, with automobile makers suffering the most. Although chipmakers have been ramping up production and millions of dollars are being pumped into boosting production, the supply crunch is expected to last for months.
Semiconductor sales have soared almost every month over the past couple of years. Thus, major microchip makers like NVIDIA Corporation (NVDA - Free Report) , Microchip Technology (MCHP - Free Report) , ON Semiconductor (ON - Free Report) and STMicroelectronics (STM - Free Report) are likely to benefit in the near term.
Semiconductor Sales Jump in October
The Semiconductor Industry Association (“SIA”) said on Dec 6 that global semiconductor sales totaled $48.8 billion in October compared with $39.4 billion in October 2020. This reflects a jump of 24% year over year. Sales increased 1.1% on a month-over-month basis in October from September’s total of $48.3 billion. October’s gains were driven by higher demand for electronic devices.
Sales rose across all regions in October. On a year-over-year basis microchip sales grew 29.2% in the Americas, 27.3% in Europe and 23.7% in Japan. In the Asia Pacific, sales grew 22.6%, while in China, sales rose 21.1%. Month over month, sales increased 2.6% in the Americas, 2.8% in Europe and 1.1% in Japan.
Semiconductor Industry Poised to Grow
The semiconductor industry has been on a high this year after sales started skyrocketing during the peak of the pandemic. According to an earlier report from the SIA, microchip sales totaled $144.8 billion in the third quarter of 2021, soaring 27.6% year over year and 7.4% from the second quarter.
In the third quarter, the semiconductor industry also achieved a milestone of shipping the highest number of microchips units in the market’s history.
The supply crunch is likely to continue for months given the rising demand demand from various industries including automobiles. According to Deloitte’s Technology, Media & Telecommunications (TMT) 2022 Predictions report, the global semiconductor shortage could last till early 2023.
The crisis will persist despite increased investment to boost production and things will start getting better only by the end of 2022, according to the report. Moreover, venture capital firms will invest over $6 billion in microchip companies in 2022 to boost production.
A separate report from the World Semiconductor Trade Statistics says semiconductor sales will surpass expectations in 2021. According to the WSTS industry’s latest report, global microchip sales will now increase 25.6% in 2021 and 8.8% in 2022.
Our Choices
Given the rising demand for semiconductors and continuing supply crunch, the semiconductor industry is only likely to benefit in the near term. Below are five chip stocks that investors can gain from in the current scenario.
ON Semiconductor Corporation is an original equipment manufacturer of a broad range of discrete and embedded semiconductor components. ON continues to gain traction among electric vehicle manufacturers for silicon carbide and insulated-gate bipolar transistor-based products. ON Semiconductor has a well-diversified business, generating a significant percentage of revenues from each of the computing, consumer, industrial, communications and automotive end markets.
ON Semiconductor’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 12.4% over the past 60 days. Shares of ON have gained 9.4% in the past month. ON Semiconductor holds a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Microchip Technology Incorporated develops and manufactures microcontrollers, memory, and analog and interface products for embedded control systems, which are small, low-power computers designed to perform specific tasks. MCHP reported second-quarter fiscal 2022 earnings of $1.07 per share, beating the Zacks Consensus Estimate of $1.06 per share. Microchip Technology reported revenues of $1.65 billion for the quarter ended September 2021, surpassing the Zacks Consensus Estimate by 0.10%.
Microchip Technology’s expected earnings growth rate for the current year is more than 33.9%. The Zacks Consensus Estimate for current-year earnings has improved 4.5% over the past 60 days. Shares of MCHP have gained 3.8% in the past 30 days. Microchip Technology has a Zacks Rank #2.
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, which are necessary to run deep-learning algorithms.
NVIDIA’s expected earnings growth rate for the current year is 73.2%. The Zacks Consensus Estimate for current-year earnings has improved 4.6% over the past 60 days. Shares of NVDA have gained 3.3% in the past 30 days. NVIDIA carries a Zacks Rank #2.
STMicroelectronics N.V. designs, develops, manufactures and markets a broad range of semiconductor integrated circuits and discrete devices used in a wide variety of microelectronic applications, including telecommunications systems, computer systems, consumer products, automotive products and industrial automation and control systems. STM is currently witnessing very strong demand across most product lines and end markets. This is leading to strong pricing and allowing STMicroelectronicsto operate at full capacity.
STMicroelectronics’expected earnings growth rate for the current year is 65.3%. The Zacks Consensus Estimate for current-year earnings has improved 4.7% over the past 60 days.Shares of STMhave advanced 11% in the past three months. STMicroelectronicscarries a Zacks Rank #2.