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3 tech stocks that are on fire in 2021 (hint: Apple isn't one)

Brian Sozzi
·Editor-at-Large
·3 min read
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Somewhat under the radar, semiconductor stocks have come out blasting at the onset of 2021 as investors bet on multinational companies ramping up tech spending as COVID-19 vaccinations bring civilizations back to some form of normal.

Year-to-date, Advanced Micro Device (AMD) shares have led the chip space gaining 7.2%. Nvidia (NVDA) and Intel (INTC) round out the top three performers, notching 6.5% and 6.2%, respectively, on the year.

Intel’s uptrend is interesting in the sense it’s now under siege by activist Dan Loeb at Third Point, who is pushing for a split-off of certain businesses and better execution by management. But the buying activity in Intel — which has struggled a bit in recent quarters on the manufacturing front — underscores the strong demand for the economic recovery thesis. To be sure, such a thesis plays right into the early cycle nature of chip buying by customers.

Meanwhile, Micron (MU) shares have popped 5% year-to-date. The Philadelphia Semiconductor Index — known as the SOX — is up 7.2% this year, handily outperforming Apple’s (AAPL) surprising 2.4% drop.

San Jose, CA, USA - March 26, 2019: Micron Technology Inc. One of american leader in  semiconductor devices, dynamic random-access memory, flash memory, USB flash drives, solid-state drives.
San Jose, CA, USA - March 26, 2019: Micron Technology Inc. One of american leader in semiconductor devices, dynamic random-access memory, flash memory, USB flash drives, solid-state drives.

“We think 2021 is setting up to be a banner growth year for semiconductors as 1) the macro-economy recovers, 2) distribution channels refill, and 3) markets see increased semi content,” says Piper Sandler semiconductor analyst Harsh Kumar.

Added Kumar, “First, we feel the global re-opening and recovery will benefit semiconductors, as enterprises and consumers enter the new normal. Second, distribution channels are at or near all-time lows, and the refilling of the channel should add another leg of growth on top end demand. Finally, markets like automotive, industrial, mobile, and several others are benefitting from increasing semiconductor content. Overall, we see 2021 being a strong year for semis, particularly after a weak 2019 (trade war) and 2020 (pandemic).”

Some of Kumar’s top semiconductor picks include Nvidia, Broadcom (AVGO), NXP Semiconductors (NXPI) and ON Semiconductors (ON).

Investors got a taste of what could lay ahead for semis this year via earnings from Micron late last week.

Fiscal first quarter non-GAAP earnings per share surged 63% from a year ago amid impressive gains in gross and operating profit margins. The company — which lifted guidance in December — credited strong demand for 5G-enabled smartphones, auto technology and improved DRAM pricing for the strong quarter.

The company sees fiscal second quarter non-GAAP earnings per share rising as much as 6% sequentially.

“The vaccine rollout combined with the fiscal stimulus that you see all central banks injecting around the world, we certainly think has the potential to enhance market demand“, said Manish Bhatia, Micron’s executive vice president of global operations, on Yahoo Finance Live. “That’s why we are so bullish on 5G-enabled smartphones, bullish on PCs and bullish on automotive.”

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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