novel coronavirus pandemic has demonstrated how the faster pace of digital transformation in society is here to stay. During the bull run of the past decade, semiconductor stocks have been essential drivers of the broader technology sector’s upside.” data-reactid=”12″>The impact of the novel coronavirus pandemic has demonstrated how the faster pace of digital transformation in society is here to stay. During the bull run of the past decade, semiconductor stocks have been essential drivers of the broader technology sector’s upside.
Semiconductors are the brains inside electronic devices. Chips are used in a wide range of products in computing, telecommunications, gaming, transportation, military systems and healthcare. They are typically behind technology innovation. As a result, shares of semiconductor companies usually act as a bellwether for the technology sector as a whole. For example, when smartphone sales increase or fall, semiconductor stocks are impacted. A similar relationship holds between shares of chip stocks and the sales of personal computers, servers for data centers and other large-end markets for microprocessors.
InvestorPlace – Stock Market News, Stock Advice & Trading Tips” data-reactid=”19″>InvestorPlace – Stock Market News, Stock Advice & Trading Tips
Put another way, the semiconductor industry is cyclical. During periods of high demand, upturns occur. There may also be supply shortages, leading to higher prices and revenue growth. Thus profits of chip companies may ebb and flow dramatically. It’s never easy to know whether the downside of a given cycle might take longer than previously expected.
Semiconductor Industry Association show that chips have become the our fourth-largest export.
In addition, for most semiconductor companies, China is both a consumer and a supplier. China consumes about 50% of all semiconductors made worldwide. Furthermore, many U.S. technology companies either have manufacturing plants in China or use Chinese companies in their supply chains. Thus, in 2018 and 2019, pressures like the U.S.-China trade war weighed significantly on the sector’s outlook.
At present, the current health and economic environments in the U.S. and globally present an array of uncertainty. Meanwhile, we are finishing a busy earnings season and getting ready to look forward to the Presidential election excitement. As a result, given the recent stellar increase in the prices of many semiconductor stocks, there may likely be short-term volatility and profit-taking in the sector in the coming weeks.
However, as new frontiers in technology — such as the internet of things (IoT), artificial intelligence (AI), autonomous driving and 5G — are developed, I am are bullish on the future of the semiconductor industry.
With that in mind, here are seven semiconductor stocks that could be appropriate for long-term portfolios:
- Advanced Micro Devices (NASDAQ:AMD)
- Intel (NASDAQ:INTC)
- iShares PHLX Semiconductor ETF (NASDAQ:SOXX)
- Micron Technology (NASDAQ:MU)
- Nvidia (NASDAQ:NVDA)
- Qualcomm (NASDAQ:QCOM)
- SPDR S&P Semiconductor ETF (NYSE:XSD)
Let’s look at what makes each among the best to buy now.
Source: Joseph GTK / Shutterstock.com
number 460 on the Fortune 500 company list.
Year-to-date, AMD stock is up about 75%.
released solid Q2 results. It announced revenue of $1.93 billion, operating income of $173 million, net income of $157 million and diluted earnings per share of 13 cents. Non-GAAP earnings were 18 cents per share. The company reports in two segments:
- Computing and Graphics (revenue was revenue was $1.37 billion, up 45% YoY and down 5% quarter-over-quarter. YoY higher revenue was driven by strong Ryzen processor sales. The quarter-over-quarter decline was due to lower graphics processor sales);
- Enterprise, Embedded and Semi-Custom (revenue was was $565 million, down 4% YoY and up 62% quarter-over-quarter. Revenue was lower YoY due to lower semi-custom product sales largely offset by higher EPYC processor sales. The quarter-over-quarter increase was driven by higher EPYC processor and semi-custom product sales).
Total revenue was up 26% year-over-year (YoY) primarily driven by higher Computing and Graphics segment revenue. Revenue was up 8% quarter-over-quarter primarily driven by higher Enterprise, Embedded and Semi-Custom segment revenue.
Gross margin was 44%, up 3% points year-over-year and down 2% points quarter-over-quarter. The YoY increase was primarily driven by Ryzen™ and EPYC™ processor sales. The quarter-over-quarter decrease was due to increased semi-custom product sales.
Finally cash and cash equivalents were $1.78 billion at the end of the quarter. AMD expects Q3 2020 revenues of $2.55 billion (+/-$100 million), indicating YoY and quarter-over-quarter growth of 42% and 32%, respectively.
Wall Street noted that AMD has been taking market share from Intel in the server processor market. Management wants to reach double-digit market share in that space.
In summary, it was a great quarter which ended with a robust outlook. AMD stock deserves to be on the long-term buy list as one of the go-to semiconductor stocks to buy.
Source: Kate Krav-Rude / Shutterstock.com
Q2 results. Revenue of 19.7 billion was up 20% YoY. Intel reports earnings by two main segments: Data-centric and PC-centric. Data-centric revenue grew 34%, accounting for 52 percent of total revenue; PC-centric revenue grew 7% YoY.
PC-centric includes Intel’s PC and mobile-device chip business. The central processing unit (CPU) is the “compute” in the computer. This segment makes the CPUs.
The chip giant highlights that the data center is at the heart of its transformation from a PC company to one that powers the cloud. Going forward, DCG is expected to be the company’s main growth engine.
Chipzilla controls nearly three-quarters of the CPU market, and Intel processors are the main component — “Intel Inside” — in most of the world’s personal computers and servers. Yet, the worldwide PC market, which is also Intel’s core market, has been at best flat for the past few years.
Over the past few years, the decline of PCs has also affected the price of Intel stock as until recently the shares have traded in a rather tight range. Now Intel management is increasingly on a mission to redefine the company and restructure itself to better match the needs of customers and the growth in data.
We are all witnessing the fact that computing is increasingly becoming personal and incorporated into many more aspects of daily life. Recent technological advancement can be summarized by growth in data centers, Internet of Things (IoT) and memory. Memory complements data centers and IoT, enabling systems to be faster.
90% share of the data center server market, which has been a consistent growth driver for the company. As the world becomes more connected and focuses on smart devices, there will likely be more demand for data and connectivity to devices, fueling growth in Intel’s DCG segment and possibly stock price.
In the Q2 report, however, management said that Intel’s 7-nanometer chips would be delayed and fall a year behind schedule. As a result, INTC sold off, pushing valuation to attractive levels. If you are looking for a semiconductor stock with a reliable dividend, too, then INTC stock needs to be on your watchlist.