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Semiconductor Sales Rise on Higher Demand: 4 Stocks to Buy

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The semiconductor industry was already doing well and then got further boost from higher sales of electronics and PCs during the pandemic. According to the Semiconductor Industry Association (SIA), global semiconductor sales continued to put up a great show in February following a great start to the year.

Not only is the semiconductor industry doing well, but also higher demand has resulted in a shortage of microchips. In fact, this shortage is now affecting the production of electronics and automobiles, while the semiconductor industry continues to thrive on growing demand.

Semiconductor Sales Rise in March

The SIA said on Apr 5 that global semiconductor sales rose to $39.5 billion in February, jumping 14.7% on a year-over-year basis. However, it declined marginally by 1% from January’s total of $40 billion.

SIA also said that the impressive jump in sales in the first two months of the year shows the strength in the industry. Moreover, microchip sales in the China market witnessed the largest year-over-year growth, primarily because sales were down substantially in that country last year after the COVID-19 outbreak.

Regionally, year-over-year sales were witnessed in all major markets. Sales in Asia-Pacific grew 18.2%, while in China it jumped 18.9%, followed by 9.7% in Americas and 6.8% in Europe. On a month-over-month basis, sales increased 0.8% in Europe and 1.5% in Asia Pacific.

Microchips Demand Poised to Grow

After having a great 2020, the semiconductor industry started this year on a high. Semiconductor sales grew an impressive 8.3% year over year to $117.5 billion in the fourth quarter and are likely to end first-quarter 2021 on a high. Demand for microchips has been getting a boost from the 5G boom in Europe and some Asian countries like China and Singapore.

Moreover, demand for microchips surged during the peak of the pandemic as more people bought electronic goods. This drove microchip sales but at the same time resulted in a supply crunch, which is now hurting some industries, especially automobiles. The automotive sector’s recovery was expected to take place faster but carmakers are now faced with another roadblock due to the supply crunch.

Many companies have also temporarily halted the production of many of their vehicles due to the supply shortage. However, this supply shortage is a sign that microchips are in high demand and the situation is likely to remain so.

Our Choices

The semiconductor market is likely to continue thriving in 2021. Below are five chip stocks that investors can gain from in the current scenario.

Analog Devices, Inc. ADI is an original equipment manufacturer of semiconductor devices, specifically, analog, mixed-signal and digital signal processing integrated circuits.

The company’s expected earnings growth rate for next year is 22.4%. The Zacks Consensus Estimate for current-year earnings has improved 5.6% over the past 60 days. Analog Devices carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Texas Instruments Incorporated TXN is an original equipment manufacturer of analog, mixed-signal and digital-signal processing integrated circuits.

The company’s expected earnings growth rate for the current year is 13.4%. The Zacks Consensus Estimate for current-year earnings has improved 1.2% over the past 30 days. Texas Instruments carries a Zacks Rank #2.

NVIDIA Corporation NVDA is the worldwide leader in visual computing technologies and inventor of the graphic processing unit. Over the years, the company’s focus has evolved from PC graphics to artificial intelligence-based solutions that now support high-performance computing, gaming and virtual reality platforms.

The company’s expected earnings growth rate for the current year is 33.7%. The Zacks Consensus Estimate for current-year earnings has improved 15.1% over the past 60 days. NVIDIA has a Zacks Rank #2.

Micron Technology, Inc. MU through global brands, namely Micron, Crucial and Ballistix, manufactures and markets high-performance memory and storage technologies including Dynamic Random Access Memory, NAND flash memory, NOR Flash, 3D XPoint memory and other technologies.

The company’s expected earnings growth rate for the current year is 67.5%. The Zacks Consensus Estimate for current-year earnings has improved 21.9% over the past 60 days. Micron carries a Zacks Rank #2.

The Hottest Tech Mega-Trend of All

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See Zacks' 3 Best Stocks to Play This Trend >>


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