While listing semiconductor stocks to buy typically generates a positive response, this year provides a contrasting case. Though the major indices all printed red ink since the start of 2022, technology-centric market ideas suffered disproportionately. Nevertheless, bold contrarians may enjoy an upside opportunity in the long run.
Firstly, semiconductor stocks to buy trade cyclically. With the Federal Reserve committed to raising the benchmark interest rate, risk-on sentiment faded due to higher borrowing costs. However, it’s unlikely that this circumstance will stay like this forever.
Secondly, the companies undergirding semiconductor stocks to buy align with several relevant sectors, such as data centers, blockchain functionality, or even video games. Unless these market segments become obsolete, having a long-term framework for the semis is probably a reasonable wager.
Finally, on the domestic front, the passage of the CHIPS Act for America should help bolster manufacturing activities. While not everyone benefits directly from the legislation, increased activities should spark positive spillover effects. Therefore, below are the semiconductor stocks to buy for contrarian investors.
ASML Holding NV
Advanced Micro Devices
ASML Holding NV (ASML)
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While the category of semiconductor stocks to buy features plenty of the usual suspects, a growing number of investors identified ASML Holding NV (NASDAQ:ASML) as a significant long-term opportunity.
As per CNBC, the Netherlands-based ASML “is the only firm in the world capable of making the highly complex machines needed to manufacture the most advanced chips.”
Unfortunately, geopolitical flashpoints and supply chain disruptions prevent ASML from acquiring essential commodities. Therefore, it received no exemption from the pain associated with buying formerly popular semiconductor stocks. Since the start of the year through the Sept. 28 session, ASML slipped nearly 45%.
At the same time, the long-term implications for the underlying company make it an attractive bet. While it’s difficult to see now, peace will probably return to eastern Europe at some point.
Per Gurufocus.com, ASML features a modestly undervalued financial profile. Its main highlights include a longer-term robust growth trajectory and excellent profitability metrics.
Advanced Micro Devices (AMD)
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One of the most popular manufacturers of graphics processing units (or GPUs) for advanced video game systems and cryptocurrency mining, Advanced Micro Devices (NASDAQ:AMD) long represented one of the semiconductor stocks to buy.
However, some might argue that AMD features meme-ish qualities and often receives hype on investing forums. Of course, 2022 has been a bit of a culture shock for Advanced Micro Devices. Rather than leading the charge, it represents the technology sector’s laggards.
For instance, AMD stock fell more than 54% since the start of the year. During the same period, the Nasdaq Composite index dropped 30%. It’s weird to say the index “performs better” than AMD, but it’s mathematically appropriate.
Still, the video gaming sector should come back in the years ahead. Per data cited by the World Economic Forum, global gaming revenue should hit $321 billion by 2026.
On top of that, cryptos tend to gyrate in the extreme. Once a bullish cycle enters the space, AMD could be a massive beneficiary due to the aforementioned crypto mining relevancies.
Once the undisputed king of semiconductor stocks to buy, Intel (NASDAQ:INTC) has presented a rough profile in recent years. Controversies and competitive pressures have put the chipmaker on the backfoot several times.
For example, INTC sank nearly 29% in the trailing five-year period. During the same period, rival AMD gained a whopping 436%. So far this year, the performance for Intel is better but only on a relative basis, down 49%. Still, investors have had a tough time trusting INTC as one of the semiconductor stocks to buy. In late July this year, CNBC reported that Intel’s poor earnings reflected diminishing demand for PCs.
Nevertheless, Intel may generate some positive momentum in the data center market. Based on recent data, Intel commands a 69.5% share of the data center market. In addition, according to Allied Market Research, the global data center market could grow from $187.35 billion in 2020 to $517.17 billion by 2030.
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A multinational semiconductor contract manufacturing and design company, GlobalFoundries (NASDAQ:GFS), benefits from geopolitical dynamics.
As Investor’s Business Daily bluntly put it:
For the U.S. and a growing number of countries, the fact that many chipmakers operate in Taiwan remains a problem. Growing military tension between the U.S. and China over Taiwan is one reason.
The solution? It might seem obvious, and finally, politicians took notice.
GlobalFoundries makes most of its semiconductors in upstate New York, Dresden, Germany, and Singapore. In addition, the outlook for GlobalFoundries stock has brightened as more customers sign long-term deals to ensure chipmaking capacity is there when they need it. The company has also told analysts that it has more than $20 billion in long-term agreements that can’t be canceled.
However, despite long-term positive implications, GFS stock remains down 21% year-to-date. Still, investors committed to a patient outlook should regard GFS as one of the semiconductor stocks to buy.
Micron Technology (MU)
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An American chip manufacturer, Micron Technology (NASDAQ:MU), specializes in computer memory and data storage, including dynamic random-access memory, flash memory, and USB flash drives. Currently, the company represents one of the essential cogs in the political narrative to bring back critical manufacturing to the U.S.
Earlier this month, Micron broke ground for a manufacturing fab in Boise, Idaho. More significantly, management has stated that the investment was possible via the CHIPS and Science Act.
Still, the news hasn’t helped MU stock in the open market. Since the January opener, Micron shares are nearly 47% below parity. At the same time, the red ink may represent a bold contrarian opportunity for semiconductor stocks to buy.
According to Gurufocus.com, MU features a significantly undervalued financial profile. Notably, MU commands a forward price-earnings ratio of just under 6x. That’s well below the industry median of 14x.
Skyworks Solutions (SWKS)
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A wireless semiconductor company, Skyworks Solutions (NASDAQ:SWKS), “designs and manufactures radio frequency and complete semiconductor system solutions for mobile communications applications,” per a Bloomberg description.
Per Skyworks’ website, the company seeks to “launch the true potential of 5G.” Specifically, Skyworks brings the registered trademark SKY5 unifying platform to its 5G small cell and multiple-input, multiple-output (or MIMO) technology.
Although compelling on paper, investors ran from SWKS stock throughout this year. Since the start of 2022, SWKS has fallen nearly 42%. In the trailing month, it’s down almost 8%. However, a patient approach could yield significant gains, making Skyworks one of the semiconductor stocks to buy.
Per Gurufocus.com, the tech firm features a significantly undervalued financial profile. The company enjoys a solid balance sheet and vigorous growth and profitability metrics. Specifically, Skyworks features a net margin of 24.1%, much higher than the underlying industry’s median of 10.2%.
Marvell Technology (MRVL)
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Based in Santa Clara, California, Marvell Technology (NASDAQ:MRVL) presents a well-balanced profile among semiconductor stocks to buy. Primarily, the company specializes in advanced connectivity protocols, offering computational, security, and networking platform solutions.
On a related note, Marvell also features a vast data center portfolio, enabling its enterprise-level clients to scale up quickly and securely.
In addition, the tech firm’s automotive innovations, particularly in safety mechanisms and autonomous driving solutions, give Marvell significant upside potential. Currently, though, Wall Street doesn’t see it that way. MRVL is down over 50% YTD. In the trailing month, the stock declined by 9%.
However, for the contrarian investor, Marvell presents an attractive profile. Per Gurufocus.com, MRVL is significantly undervalued based on its proprietary valuation metrics. Notably, in the quarter that ended July 2022, Marvell posted revenue of $1.52 billion, up 41% year-over-year. Moreover, net income came in at $4 million, much more favorable than the net loss of $276 million in the same quarter last year.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.
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