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Global Semiconductor Sales Hit Record High in May: 5 Picks


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Global semiconductor sales increased 21% in May on a year-over-year basis. This certainly is good news for chipmakers that have been bearing the brunt of President Donald Trump's trade policies. Trade war fears have been weighing on markets for quite some time and semiconductor stocks, which so long remained unaffected, felt the heat last month after the United States announced tariffs of 25% on semiconductors.

However, with semiconductor sales hitting a record high in May, the industry will get its much-needed respite from trade war fears. Moreover, the global semiconductor market is poised to grow at a rapid pace in 2018 and 2019. Given this scenario, it makes good sense to indulge in semiconductor stocks. 

Global Semiconductor Sales Hit All-Time High

According to the Semiconductor Industry Association (SIA), worldwide sales of semiconductor increased 21% year over year in May. This also marks the industry's highest ever monthly sales. Global sales of semiconductors reached $38.7 billion in May compared with $37.6 billion in April, reflecting an increase of 3%. This is the 14th consecutive month when sales surged more than 20%.

Understandably, the semiconductor industry has been performing well globally, with year-to-year sales increasing across all regions. Sales in Americas increased 31.6%, while China increased 28.5%. Sales in Europe, Japan and Asia Pacific jumped 18.7%, 14.7% and 8.7%, respectively, in May.

Chip Stocks Braving Trade War Fears

Chip stocks were on a rally till some time back. However, on Jun 15, Trump announced tariffs on $50 billion worth of Chinese goods including semiconductors. This saw shares of chipmakers with significant exposure to China taking a hit. The United States is the largest semiconductor manufacturing country, with China being its biggest market. Naturally, higher tariffs will take a toll on the revenues of these semiconductor manufacturers.

A number of U.S.-based semiconductor companies generate the majority of their revenues from China and additional tariffs will certainly hurt their profits. However, it's the growing demand for semiconductors that has been helping the industry. Despite these fears having gripped markets, semiconductor stocks have little exposure to Trump's recently imposed import duties or China's retaliatory tariffs.

Semiconductor Market to Grow

Per a report released by World Semiconductor Trade Statistics (WSTS) in early June, the global semiconductor market is poised to grow 12.4% in 2018. The earlier forecast by WSTS was a 7% rise in chip sales this year. The latest forecast will certainly add more cheer to chipmakers that have been fretting over trade war issues. Moreover, WSTS forecasts that surging demand for semiconductors will also help sales grow by another 4.4% in 2019 to reach $484 billion.

The raised forecast is based on robust growth in the memory and analog segments. Needless to say, the United States is the largest semiconductor manufacturing country and growing demand for chips only paints a rosier picture for the industry when the markets reeling under trade war fears.

Our Choices

Increasing demand for chip stocks despite lingering trade war concerns has been going in favor of the industry with global semiconductor sales hitting an all-time high in May.  Moreover, the semiconductor industry is poised to grow at a robust pace through 2018 and 2019. Obviously, it makes good sense to invest in semiconductor stocks now. 

However, picking winning stocks may be difficult. We have narrowed down our search to the following stocks based on a good Zacks Rank and other relevant metrics.

Micron Technology, Inc.MU is one of the world's leading providers of advanced semiconductor solutions.  

Micron Technology sports a Zacks Rank #1 (Strong Buy). The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved by 6.6% over the last 60 days.

NVIDIA CorporationNVDA is a worldwide leader in graphics processors and media communications devices.

The company has expected earnings growth of 61.2% for the current year. The Zacks Consensus Estimate for the current year has improved by 12.5% over the last 60 days. The stock carries a Zacks Rank #1. You can see  the complete list of today's Zacks #1 Rank stocks here .

IntelINTC is one of the world's largest semiconductor chipmaker.

Zacks Rank #2 (Buy) Intel has expected earnings growth of 15.6% for the current year. The Zacks Consensus Estimate for the current year has improved by 4.2% over the last 60 days.

XcerraXCRA engages in designing, manufacturing and marketing automatic test equipment for the semiconductor industry.

Xcerra has a Zacks Rank #2. The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved by 4% over the last 60 days.

STMicroelectronics N.V.STM is a global independent semiconductor company which designs, develops, manufactures and markets a broad range of semiconductor integrated circuits and discrete devices used in a wide variety of microelectronic applications.

STMicroelectronics carries a Zacks Rank #2. The company has expected earnings growth of 40.8%% for the current year. The Zacks Consensus Estimate for the current year has improved by 3% over the last 60 days.

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STMicroelectronics N.V. (STM): Free Stock Analysis Report

Intel Corporation (INTC): Free Stock Analysis Report

NVIDIA Corporation (NVDA): Free Stock Analysis Report

Xcerra Corporation (XCRA): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Business , Stocks
Referenced Symbols: STM , INTC , NVDA , XCRA , MU



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