Looking forward, the epic semiconductor stocks rally still has plenty of room to run. Since the year began, the Van Eck Vector Semiconductor ETF (NYSE:SMH) is up nearly 61% year to date. The iShares Trust S&P Semiconductor Index Fund (NASDAQ:SOXX) is up 56%. The best part? The sector is well-positioned to push even higher in 2020.
As InvestorPlace.com contributor Luke Lango pointed out, “Since early 2018, escalating trade tensions between the U.S. and China have weighed on global semiconductor demand and sales. But, those escalating trade tensions are now de-escalating, and should continue to de-escalate into 2020. As they do, semiconductor demand and sales will rebound.”
Additionally, according to IHS Markit, global semiconductor revenue would rebound up to 5.9% from $442.8 billion in 2019 to $448 billion by 2020. “IHS said that upturn will be directly due to 5G smartphones because the smartphone business is the largest consumer of semiconductors of any industry, with $87.7 billion in global revenue this year,” said Light Reading Editorial Director Mike Dano.
In short, semiconductor stocks — especially those involved with 5G — could be explosive in 2020. That being said, here are three semiconductor stocks I think could benefit in the new year:
Semiconductor Stocks to Invest In: Qualcomm (QCOM)
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When it comes to Qualcomm (NASDAQ:QCOM) stock, the next big catalyst is 5G. Considering the massive rollout we’re about to see, its chips will be under sizable demand.
In fact, Qualcomm expects global smartphone makers to ship up to 450 million 5G handsets in 2021, and another 750 million in 2022. We also have to remember Apple (NASDAQ:AAPL) iPhones will be powered by QCOM 5G modem chips.
As a result, Qualcomm will benefit because phones will therefore need more chips.
“We exit the fiscal year having successfully executed on our strategic priorities: helping to drive the commercialization of 5G globally, completing a number of important anchor license agreements and executing well across our product road map,” said CEO Steve Mollenkopf, as I pointed out the other day.
Marvell Technology (MRVL)
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After losing 35% of its value in the latter part of 2018, Marvell Technology (NASDAQ:MRVL) is now up 73% since then — all thanks to clear signs that its 5G business is about to take off in a big way. The company now believes revenues will hit $600 million a year!
“Our design win momentum continues in 5G, and we recently announced a significant long-term partnership with Samsung to deliver multiple generations of embedded processors and baseband processors for both LTE and 5G base stations,” said CEO Matthew Murphy. “We expect shipments of our 5G products to start to ramp toward the end of the fiscal year 2020 and continue to grow rapidly into fiscal 2021 and beyond.”
Better, Marvell acquired Avera Semiconductor for $650 million earlier this year. This move will allow it to expand into the application-specific integrated circuits (ASIC); and those have become popular with regards to machine learning and the Internet of Things. Furthermore, 5G demand should create bigger demand for ASICs down the road.
With that in mind, analysts are just as upbeat on the stock.
JP Morgan analyst Harlan Sur sees the company’s 5G business “ramping strongly.” Barclays’ Blayne Curtis says MRVL is the bank’s top semiconductor stock for 2020.
“The key point for us is the strength of the 5G opportunity ahead,” he said.
Micron Technology (MU)
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Micron Technology (NASDAQ:MU) stock should also see a boost from 5G. This is due to demand for its dynamic random access memory chips (DRAMs) and NAND flash storage. Remember, when it comes to 5G, every device will require a combination of both DRAM and NAND memory.
We must also remember that 5G devices, such as smartphones, in 2020 and beyond will need “at least 50% more memory than their 4G cousins,” as highlighted by Motley Fool contributor, Anders Bylund.
Plus, with 5G the average phone will need six gigabytes of DRAM from the four GB in current phones, as noted by Barron’s contributor, Eric Savitz.
“Higher-end phones will need eight GB to 12 GB of DRAM, up from six GB. The same pattern will unfold with NAND flash memory — (Sumit Sadana, chief business officer at Micron Technology) sees midrange phones shifting from 64 and 128 GB models to 128 and 256 GB, with high-end models getting up to a terabyte of NAND.”
That offers sizable long-term opportunity for a company like Micron, whose position in mobile is only growing stronger.
As of this writing, Ian Cooper did not hold a position in any of the aforementioned securities.
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