The semiconductor industry faced several challenges over the past couple of years that saw sales slowing. Inflationary pressures have been one of the major reasons that slowed demand.
However, the industry put up a tough fight and sales have been rebounding. The enthusiasm surrounding artificial intelligence (AI), especially generative AI, has also been keeping several semiconductor companies in focus.
The Semiconductor Industry Association (SIA) reported on Jun 6 that global semiconductor sales totaled $46.4 billion in April, up 1.1% from March’s total of $45.9 billion. Year over year, semiconductor sales jumped 15.8% in April.
Demand for semiconductors was already high but rising price pressures over the past several months preceded by a supply-chain crisis hampered sales. The Federal Reserve’s monetary tightening campaign saw interest rates increasing by 525 basis points, resulting in inflation declining sharply over the past. Higher interest rates have been posing challenges for the industry.
However, the ongoing enthusiasm surrounding AI has brought several semiconductor companies that manufacture AI chipsets back into focus. The space is being dominated by NVIDIA Corporation NVDA. Its shares have soared 211.5% in the past 12 months and 146.4% year to date.
Nvidia’s impressive rise is fueled by its graphics processing units, which have sparked significant advancements in AI. Optimism surrounding AI has risen over the last five years, fueled by the widespread adoption of the Internet and other digital technologies.
The AI market is anticipated to expand rapidly in the near future, with demand for AI chipsets already on the rise.
Also, the World Semiconductor Trade Statistics (WSTS) forecasts global semiconductor sales to surge 16% in 2024 and 12.5% in 2025.
Stocks to Watch
Given the promising future, it would be wise to invest in semiconductor stocks like NVIDIA Corporation,Micron Technology, Inc. MU, Advanced Micro Devices AMD and QUALCOMM Incorporated QCOM, which investors can gain from in the near term.
NVIDIA Corporation is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit, or 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 has an expected earnings growth rate of 104.8% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 11.3% over the last 60 days. NVDA presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Micron Technology, Inc. has established itself as one of the leading worldwide providers of semiconductor memory solutions. Through global brands, namely Micron, Crucial and Ballistix, MU manufactures and markets high-performance memory and storage technologies including Dynamic Random Access Memory, NAND flash memory, NOR Flash, 3D XPoint memory and other technologies. Micron Technology’s solutions are used in leading-edge computing, consumer, networking and mobile products.
Micron Technology’s expected earnings growth rate for next year is 119.1%. The Zacks Consensus Estimate for current-year earnings has improved 6.3% over the last 60 days. MU currently carries a Zacks Rank #2 (Buy).
Advanced Micro Devices has strengthened its position in the semiconductor market on the back of its evolution as an enterprise-focus company from a pure-bred consumer-PC chip provider. AMD has emerged as a strong challenger to NVIDIA’s dominance in the graphic processing unit or GPU market based on its Radeon chips.
AMD’s processors are primarily powered by the company’s proprietary Zen CPU and Vega GPU architectures. Advanced Micro Devices generated revenues of $22.68 billion in 2023.
Advanced Micro Devices’ expected earnings growth rate for the current year is 29.1%. The Zacks Consensus Estimate for the current-year earnings has improved 0.3% over the past 30 days. AMD currently carries a Zacks Rank #3 (Hold).
QUALCOMM Incorporated designs, manufactures and markets digital wireless telecom products and services based on the Code Division Multiple Access (CDMA) technology. QCOM’s products include CDMA-based integrated circuits and system software for wireless voice and data communications as well as global positioning system products.
QUALCOMM also offers development and other product-related services to U.S. government agencies and their contractors.
QUALCOMM’s expected earnings growth rate for the current year is 17.1%. The Zacks Consensus Estimate for the current-year earnings has improved 0.3% over the past 30 days. QCOM currently carries a Zacks Rank #3.
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