3 Top-Ranked Semiconductor Stocks With Double-Digit Gains YTD


The global semiconductor industry, which plays a key role in the high-growth technology space, has been relatively less affected by the coronavirus pandemic.

With the reopening of the economy, rebound in smartphone sales in markets like China and people spending more time on mobile phones, the semiconductor industry is expected to benefit in the near term.

According to World Semiconductor Trade Statistics, annual global semiconductor sales are expected to grow 5.9% in 2020 and 6.3% in 2021.

Let’s dig deeper to understand what makes the semiconductor space fundamentally attractive.

Semiconductor Stocks Hold Promise

There has been a spurt in chip demand lately from PC manufacturers and data-center operators.

The growing demand for hardware that is facilitating the work-from-home setting is a key catalyst. There has also been an increase in the demand for cloud storage. Data-center operators have enhanced their capacities to accommodate the demand spike for cloud services. The companies that provide design and other components for chip making are expected to benefit from this trend.

Additionally, growing adoption of IoTs, smartphones, storage solutions, networking and connectivity solutions — including Wi-Fi as well as Wi-Fi/Bluetooth integrated SOCs — and the need for high-speed data in both communications networks and data centers bode well for industry participants.

Increase in demand for higher speed will result in accelerated deployment of 5G technology, which promises far more speed than the current 4G LTE due to low latency. Further, 5G adoption beyond mobile is likely to boost demand for memory and storage, particularly in IoT devices, wireless infrastructure and data centers.

These apart, blockchain, IoT, autonomous vehicles, AR/VR and wearables are other growth areas.

Stocks in Focus

Here we present three semiconductor stocks that are well poised to benefit from this space’s solid prospects. These stocks have witnessed a double-digit rally so far in 2020. Further, these stocks carry a Zacks Rank #2 (Buy).

The chart below shows the price performance of the three stocks year to date.

NVIDIA (NVDA) is anticipated to keep benefiting from solid demand for graphics processing units (GPUs) in gaming desktops and notebooks. The company’s advanced graphics cards have become very popular lately, thanks to the strong rise in e-sports players and PC gamers, as well as more spending on gaming graphics processing units.

In addition, its Turing GPU and real-time ray tracing technology are witnessing increased adoption.The company’s strong presence in the datacenters market is a boon for the tech giant in the current scenario, as more businesses are shifting to cloud. This has led to a spike in the demand for GPUs, which bode well for NVIDIA.

The long-term projected EPS growth rate for this company is 16.9%. The stock has climbed 57.4% year to date.

Inphi Corporation (IPHI) operates as a provider of fabless high-speed analog semiconductor solutions for the communications and computing markets. The company has been gaining from a data center boom, transition to 5G and more. It is a leader in data movement interconnects between and inside data centers, and helps “move big data fast” around the globe.

The long-term projected EPS growth rate for this company is 37.7%. The stock has climbed 49.4% year to date.

MACOM Technology Solutions Holdings, Inc. (MTSI) is a developer of radio frequency (RF), microwave, and millimeter wave semiconductor devices and components. The shift to 5G will require rearranging base stations with massive multiple-in, multiple-out (or Massive MIMO) architecture. Each base station requires 5G-enabled RF antennas to provide better wireless performance without maxing out individual antenna power. Massive MIMO requires extra RF antennas that MACOM Technology manufactures, all the same, increasing its demand.

The Zacks Consensus Estimate for earnings for the current year has moved up 78.9% over the past 60 days. The stock has climbed 24.8% year to date.

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