4 Solid Stocks to Buy on Surging Sales of Semiconductors

Tech stocks have been one of the biggest casualties of the recent market bloodbath. However, the semiconductor sector appears to have been unaffected, as increasing demand is driving sales at a fast pace. In fact, soaring demand for semiconductors that caused a supply shortage last year is still ongoing.

Semiconductor sales, which witnessed a massive jump during the peak of the pandemic, are still strong, helping manufacturers rake in massive revenues. Given this situation, stocks like Analog Devices ADI, MACOM Technology Solutions Holdings, Inc. MTSI, Vishay Intertechnology, Inc. VSH and ON Semiconductor Corporation ON are expected to benefit in the near term.

Semiconductor Sales Jump

The Semiconductor Industry Association (SIA) said on Jun 6 that global semiconductor sales jumped 21.1% year over year in April 2022 to $50.9 billion from $42 billion in April 2021. On a month-over-month basis, sales jumped 0.7% this April from March’s $50.6 billion.

Semiconductor sales have now jumped more than 20% on a year-over-year basis for the 13th consecutive month. This reflects not only a steady surge in demand for semiconductors but also the underlying strength in the industry.

The SIA also said in its report that sales grew across all regions. On a year-over-year basis, sales grew 49% in the Americas, 19.2% in Europe and 18.5% in Japan. In China, sales jumped 13.3%, while in the Asia Pacific region sales rose 18.1%.

Semiconductor Industry on Solid Ground

After an impressive 2021, the semiconductor sector has put up a great show this year too. In fact, sales have been on the rise ever since the COVID-19 outbreak. The industry was already thriving and sales further picked up during the peak of the pandemic as millions worked and learned from home. This saw demand for PC, laptops and other networking and communication products soar, which gave a boost to semiconductor sales.

In fact, soaring demand has resulted in a semiconductor shortage globally. The crisis has been going on for over a year now, making several governments pump in millions of dollars to boost semiconductor sales. Also, manufacturers are ramping up production.

However, the crisis is far from over, with the automobile sector suffering the most. The semiconductor shortage has compelled several carmakers to cut down production, which is biting into their profits.

Semiconductor manufacturers, on the other hand, are having a great time amid this global semiconductor crisis. Increased demand has resulted in record semiconductor sales and revenues. According to the SIA, global semiconductor sales increased by 23% year over year to $151.7 billion in the first quarter.

Moreover, demand for microchips will continue to rise as Internet of Things, artificial intelligence, and virtual reality become more prevalent. Semiconductor is essential for the development of these cutting-edge technologies. As a result, demand for semiconductors is projected to continue to climb in the coming years as the need for these services grows.

Our Choices

The semiconductor industry is only likely to benefit in the near term, given the surging demand for semiconductors and the ongoing supply shortage. In the current market, there are four chip stocks that investors might gain from.

Analog Devices is an original equipment manufacturer of semiconductor devices, specifically, analog, mixed-signal and DSP integrated circuits. ADI’s product line is composed of amplifiers and comparators; analog to digital converters; digital to analog converters; video encoders and decoders; embedded processing products and DSPs; MEMS and temperature sensors; RF/IF components and converters; power and thermal management ICs, audio/video converters, amplifiers, CODECs, filters and processors. Analog Devices has manufacturing facilities in the United States, Ireland and Southeast Asia.

Analog Devices’ expected earnings growth rate for the current year is 43%. The Zacks Consensus Estimate for current-year earnings has improved 9.6% over the past 60 days. ADI currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

MACOM Technology Solutions Holdings, Inc. is a provider of power analog semiconductor solutions to varied markets. MTSI develops and produces analog radio frequency, microwave and millimeter-wave semiconductor devices, and components for applications in optical, wireless and satellite networks. MACOM Technology primarily serves three markets, namely, data center, industrial & defense and telecom.

MACOM Technology’s expected earnings growth rate for the current year is 27.9%. The Zacks Consensus Estimate for current-year earnings has improved 1.5% over the past 60 days. MTSI currently sports a Zacks Rank #1.

Vishay Intertechnology, Inc.is a global manufacturer and supplier of semiconductors and passive components. VSH’s products include metal oxide semiconductor field-effect transistors, diodes and optoelectronic components.

Vishay Intertechnology’s expected earnings growth rate for the current year is 15.5%. The Zacks Consensus Estimate for current-year earnings has improved 10.3% over the past 60 days. VSH carries a Zacks Rank #2 at present.

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 the different elements within virtually every electronic device.

ON Semiconductor’s expected earnings growth rate for the current year is 66.4%. The Zacks Consensus Estimate for current-year earnings has improved 18% over the past 60 days. ON presently has a Zacks Rank #2.

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