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10 Best Semiconductor Stocks to Buy for 2022

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·9 min read
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In this article, we discuss the 10 best semiconductor stocks to buy for 2022. If you want to skip our detailed analysis of these stocks, go directly to the 5 Best Semiconductor Stocks to Buy for 2022.

In early December, the Semiconductor Industry Association, a trade and lobbying group, revealed that global semiconductor sales had risen to more than $48 billion in October, an increase of 24% year-on-year. The World Semiconductor Trade Statistics, in a report released at the same time, forecast that the annual global sales of semiconductors were expected to grow by 8.8% in 2022 to exceed $600 billion in sales. The numbers indicate the importance of semiconductors to the global economy.

Semiconductors power nearly every technology in the world today, from electric vehicles to aircraft and even mobile devices. As the demand for tech has increased, due in part to the rapid digitization of businesses because of the pandemic, but also because of supply chain issues, semiconductor stocks have registered an incredible rally this year that is expected to last well into 2022. The difference can be judged by the fact that chip makers were growing at a rate of 6.8% in 2020, a number that jumped to over 25% this year.

Analysts expect supply chain issues to persist and the demand to rise even further in 2022. Investors who want to ride this chip boom should check out some of the top semiconductor stocks to buy for the new year that include NVIDIA Corporation (NASDAQ:NVDA), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), and Advanced Micro Devices, Inc. (NASDAQ:AMD), among others discussed in detail below.

Our Methodology

The companies that have the potential to grow in the coming year, based on the popularity and viability of the products or services they offer amid the macro economic environment, were selected for the list.

In order to provide readers with some context for their investment choices, the business fundamentals and analyst ratings for the stocks were also considered. Hedge fund sentiment was included as a classifier as well.

The hedge fund sentiment around each stock was calculated using the data of 867 hedge funds tracked by Insider Monkey.

10 Best Semiconductor Stocks to Buy for 2022
10 Best Semiconductor Stocks to Buy for 2022

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Best Semiconductor Stocks to Buy for 2022

10. ASML Holding N.V. (NASDAQ:ASML)

Number of Hedge Fund Holders: 41

ASML Holding N.V. (NASDAQ:ASML) makes and sells advanced semiconductor equipment systems. In late September, the company said that based on megatrends in the electronics industry, it expected to grow annual revenue to between €24 billion and €30 billion by 2025.

Piper Sandler analyst Weston Twigg recently initiated coverage of ASML Holding N.V. (NASDAQ:ASML) stock with an Overweight rating and a price target of EUR758, noting that the firm was expanding gross margins and heading into 2022 with “powerful tailwinds”.

Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in ASML Holding N.V. (NASDAQ: ASML) with 4.1 million shares worth more than $3 billion.

Just like NVIDIA Corporation (NASDAQ:NVDA), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), and Advanced Micro Devices, Inc. (NASDAQ:AMD), ASML Holding N.V. (NASDAQ:ASML) is one of the stocks that elite investors are buying.

In its Q2 2021 investor letter, Polen Capital, an asset management firm, highlighted a few stocks and ASML Holding N.V. (NASDAQ:ASML) was one of them. Here is what the fund said:

“Dutch technology company ASML is the world’s only supplier of photolithography systems to leading-edge semiconductor manufacturers. It is a gross simplification and a valid point to note that ASML’s technology enables the computing technology we use today. For years, ASML engineers bent the laws of physics and enabled Moore’s Law—which states that computer chips will become faster and cost less—to progress.

Incremental innovation gains mushroomed with the rollout of Extreme Ultraviolet (EUV) technology. We were impressed by management’s recent acknowledgment that demand for ASML’s lithography systems is exceeding their prior expectations. Recent announcements by management and major customers for ASML give us even more confidence in the sustainability of growth. We believe ASML could grow its earnings at a high-teens rate over the coming five years.”

9. KLA Corporation (NASDAQ:KLAC)

Number of Hedge Fund Holders: 44

KLA Corporation (NASDAQ:KLAC) markets process control and yield management solutions for the semiconductor industry. It has registered year-on-year growth of more than 42% this year, topping chip equipment manufacturers, and looks set to continue on that trajectory in 2022.

Some of the products and services offered by KLA Corporation (NASDAQ:KLAC) to the chip industry include defect inspection and review systems, metrology solutions, process monitoring computational lithography software, and data analytics.

At the end of the third quarter of 2021, 44 hedge funds in the database of Insider Monkey held stakes worth $1.8 billion in KLA Corporation (NASDAQ:KLAC), compared to 45 in the previous quarter worth $1.3 billion.

8. Broadcom Inc. (NASDAQ:AVGO)

Number of Hedge Fund Holders: 50

Broadcom Inc. (NASDAQ:AVGO) supplies semiconductor infrastructure software solutions. On December 7, the company announced that it had agreed to a deal to purchase computer software firm AppNeta that specializes in network performance monitoring.

Broadcom Inc. (NASDAQ:AVGO) recently posted earnings for the fourth fiscal quarter, reporting earnings per share of $7.81, beating estimates by $0.04. The revenue over the period was $7.4 billion, up more than 14% year-on-year.

Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Cantillon Capital Management is a leading shareholder in Broadcom Inc. (NASDAQ:AVGO) with 1 million shares worth more than $525 million.

In its Q2 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Broadcom Inc. (NASDAQ:AVGO) was one of them. Here is what the fund said:

“A good way to conceptualize how we think about portfolio construction is to picture a pyramid. At the bottom of the pyramid are the durable compounding growth companies that form the strong foundation, resilience and consistency for the Strategy. We think these companies should comprise just under half of portfolio assets and feature annual revenue growth rates ranging from two times GDP up to 20% as well as healthy free cash flow generation.

Broadcom has delivered similar long-term appreciation through a combination of organic growth, capital deployment into new and adjacent opportunities through merger and acquisition activity as well as returning capital to shareholders through buybacks and dividends.”

As the world saw a chip shortage, elite hedge funds closely watched and piled into semiconductor stocks like NVIDIA Corporation (NASDAQ:NVDA), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) and Advanced Micro Devices, Inc. (NASDAQ:AMD) in 2021.

7. NXP Semiconductors N.V. (NASDAQ:NXPI)

Number of Hedge Fund Holders: 51

NXP Semiconductors N.V. (NASDAQ:NXPI) makes and sells various products related to semiconductors. On November 10, the firm had revealed a collaboration with automaker Ford for the delivery of enhanced driver experiences and services across a global fleet of vehicles.

NXP Semiconductors N.V. (NASDAQ:NXPI) has an impressive dividend history and recently declared a quarterly dividend of $0.5625 per share, in line with previous. The forward yield was 1.02%. The company has a market cap of over $60 billion.

Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in NXP Semiconductors N.V. (NASDAQ:NXPI) with 929,591 shares worth more than $182 million.

In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and NXP Semiconductors N.V. (NASDAQ:NXPI) was one of them. Here is what the fund said:

“Within IT, we have also increased exposure to a cyclical semiconductor industry currently working through a severe supply shortage due to several years of capacity reductions, COVID-19 shutdowns and one-off production delays as well as demand resilience in areas like autos and smartphones. Two recent additions, specialty semiconductor maker (including) NXP Semiconductors, was among the portfolio’s leading contributors in the first quarter. NXP rose as auto production ramped up and electric vehicle sales continued to expand.”

6. Micron Technology (NASDAQ:MU)

Number of Hedge Fund Holders: 63

Micron Technology (NASDAQ:MU) makes and sells memory and storage products. Analysts expect memory and storage makers to be the standout performers within the chip industry in 2022. As the leading firm in this category, Micron could witness explosive growth.

UBS analyst Timothy Arcuri recently raised the price target on Micron Technology (NASDAQ:MU) stock to $99 from $90 and reiterated a Buy rating, backing the firm to continue on a growth trajectory with regards to earnings in 2022.

At the end of the third quarter of 2021, 63 hedge funds in the database of Insider Monkey held stakes worth $3.8 billion in Micron Technology (NASDAQ:MU), compared to 87 in the preceding quarter worth $6.3 billion.

In addition to NVIDIA Corporation (NASDAQ:NVDA), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), and Advanced Micro Devices, Inc. (NASDAQ:AMD), Micron Technology (NASDAQ:MU) is one of the stocks on the radar of hedge funds.

In its Q1 2021 investor letter, Bonsai Partners, an asset management firm, highlighted a few stocks and Micron Technology (NASDAQ:MU) was one of them. Here is what the fund said:

“Micron is a manufacturer of memory semiconductor chips. Micron appreciated 17.3% during the quarter.

With the semiconductor cycle in full swing, sentiment continued to improve for major DRAM and NAND suppliers. Spot pricing for DRAM continues its upward march due to supply shocks across the industry and sustained demand levels that continue to outstrip supply.

As a result, Micron showed improving results for the fiscal first quarter, raised guidance intra-quarter for the fiscal second quarter, and offered strong guidance for the fiscal third quarter in both growth and margins.

While the cyclical nature of DRAM hasn’t changed, the cycles themselves continue to become more benign, leading to long-term economic improvement across these businesses. Micron is now continuously profitable, with industry players in a dramatically stronger position than even just five years ago.

The biggest negative surprise in the quarter came from Micron’s exit from its 3D XPoint hybrid memory business. The company also announced its decision to sell its accompanying Utah fab. Fortunately, this development does not alter the investment thesis much since 3D XPoint was an option ticket for future growth. While it’s unfortunate this product didn’t pan out, now is an excellent time to sell a fab, so perhaps it is a blessing in disguise?”

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Disclosure. None. 10 Best Semiconductor Stocks to Buy for 2022 is originally published on Insider Monkey.