Buy These 3 Semi Stocks Instead of Volatile Cryptocurrency
After making a remarkable run till mid-December 2017, prices of Bitcoin have been volatile this year. It should be noted that the most popular cryptocurrency touched its all-time high of $19,783, on Dec 17, 2017, reflecting a jump of nearly 2,000% in less than a year. However, since then Bitcoin prices have turned turbulent and even dropped as low as $6,000 this February.
The plunge and the associated volatility can be attributed to a number of factors. Some of the Asian countries like China have imposed a ban on Bitcoin trade, while a number of other countries have tightened regulations. These have affected not only Bitcoin but also other cryptocurrencies like Ethereum, Ripple, Litecoin and many more.
The situation worsened further after the world’s two largest online ad companies — Alphabet GOOGL and Facebook FB — announced banning cryptocurrency ads on their platforms.
Moreover, forecasts are no longer unanimously rosy. Prominent investment banker, Goldman Sachs, predicts most cryptocurrencies to fail with their value falling to zero. European financial services company, Allianz, has echoed a similar opinion and is worried about the dicey nature of cryptocurrencies.
Should Investors Abandon Cryptocurrency?
Not so fast. Although the continued volatility and rising skepticism over the future of cryptocurrencies is definitely making investors nervous, we believe everything is not lost. This is because of the solid prospects of cryptocurrencies and anticipations that these will eventually replace conventional currencies and payment systems.
Mitch Steves of RBC Capital in an interview, on CNBC’s Fast Money show, stated, “Cryptocurrencies and the underlying blockchain technology” have potential to become a $10 trillion industry over the next 15 years.”
Twitter TWTR CEO Jack Dorsey, who also happens to be the CEO of payments company, Square SQ, expects “Bitcoin to be the world’s single currency in 10 years.”
The increasing number of cryptocurrencies is supporting the massive growth projections. Currently, there are more than 1500 cryptocurrencies available globally.
Semiconductor Stocks Better Investment
Cryptocurrencies are high-risk investments and not everybody’s forte. However, it would be foolish not to grab their solid growth opportunity.
We note that the rapidly growing number of digital currencies has been creating huge demand for powerful hardware that is necessary to mine these cryptocurrencies.
We recommend investors to build position on the below-mentioned semiconductor stocks that have exposure to cryptocurrencies but simultaneously have a diversified product portfolio. Having a diversified product portfolio will provide a cushion if digital currencies don’t do well.
Our Picks
Smart investors should have a look at NVIDIA Corporation NVDA which makes chips that power cryptocurrency mining. Notably, miners require advanced hardware to smoothly run parallel processing. Hence, they need powerful processors and chips. NVIDIA’s graphics processing units (GPU) are believed to be the best in creating bitcoin.
As NVIDIA is well known for offering more advanced and fast GPUs, it is the first choice of most miners. However, revenues from sales of GPUs related to cryptocurrency, contribute a meager portion to the company’s total revenues.
Therefore, any downfall in the cryptocurrency market will be immaterial to NVIDIA’s revenue growth. The company has more exposure in other fast-growing markets, including artificial intelligence (AI), gaming, datacenter and automotive, which have been witnessing tremendous year-over-year growth for the past several quarters.
This Zacks Rank #1 (Strong Buy) stock has rallied 28.4% in the year-to-date (YTD) period, outperforming the S&P 500 return of just 1.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Another pick is Intel Corporation INTC which is one the world’s largest manufacturer of semiconductor products. The company’s innovative efforts are driving the entire computer, and not just the central processing unit (CPU), which is helpful for miners. In fact, Stifel Nicolaus believes Intel’s processors will be useful for mining the digital currency.
Simultaneously, like NVIDIA, Intel too has great exposure in other fast-growing markets. The stock carries a Zacks Rank #2 (Buy) and has gained 11.7% YTD.
Investors can also go for Micron Technology, Inc. MU, which has established itself as one of the leading global providers of semiconductor memory solutions, including manufacturing memory chips. The memory chips, among the most important parts of mining rig, will be useful for miners. The company flaunts a Zacks Rank of 1 and has appreciated 48.5% YTD.
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