3 Solid Stocks to Buy on Soaring Semiconductor Sales
Semiconductor sales are projected to decline in 2023 as inflationary pressures have taken a toll on the industry. However, the industry has shown great resistance and has been trying to stage a solid turnaround, which has seen sales growing over the last two quarters.
Industry experts predict that the turnaround is steadily gathering pace, which should boost demand and eventually drive sales in 2024. Given this situation, investing in semiconductor stocks like Intel Corporation INTC, NVIDIA Corporation NVDA and Qorvo, Inc. QRVO will be a wise decision.
Semiconductor Industry Making a Rebound
The Semiconductor Industry Association (SIA) reported that global semiconductor sales totaled $46.6 billion in October, growing 3.9% from September's total of $44.9 billion.
However, compared to the October 2022 total of $46.9 billion, sales were down 0.7%. Despite the year-over-year decline, the semiconductor market has demonstrated a robust rebound, growing for the eighth consecutive month.
This positive momentum follows a solid third quarter, where sales totaled $134.7 billion, reflecting a 6.3% increase from the second quarter.
Semiconductor sales hit record highs during the peak of the pandemic and the months after that as millions worked remotely, boosting demand for PCs and other communication devices.
Supply-chain issues started impacting sales in late 2021 but the industry wasn’t much affected owing to robust demand.
However, by the second half of 2022, the semiconductor industry started facing challenges due to contracting demand resulting from inflationary pressures. The Federal Reserve responded with an aggressive rate hike policy, raising interest rates by 525 basis points since March 2022 to curb sky-high inflation.
Higher borrowing costs impacted demand, leading to a decline in sales. However, as inflation started declining in the second quarter of 2023, sales began to rebound. The expectation is for higher demand to continue through 2024, contributing to increased sales.
According to the World Semiconductor Trade Statistics (WSTS), global semiconductor sales are expected to slump 9.4% in 2023 but are projected to surge 13.1% in 2024. WSTS estimates global sales to reach $520 billion in 2023, down from the 2022 total of $574.1 billion. However, in 2024, global sales are expected to reach $588.4 billion.
The sustained and heightened demand for semiconductors is attributed to the widespread adoption and increased use of consumer electronics globally. Additionally, the growing impact of transformative technologies such as artificial intelligence, the Internet of Things, and machine learning significantly contributes to this demand across various industries.
Our Choices
Intel Corporation is the world’s largest semiconductor company and primary supplier of microprocessors and chipsets. INTC is gradually reducing its dependence on the PC-centric business by moving into data-centric businesses, such as AI and autonomous driving.
Intel Corporation’s expected earnings growth rate for next year is 97.9%. The Zacks Consensus Estimate for current-year earnings has improved 55.7% over the past 60 days. INTC presently carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
NVIDIA Corporation is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit (GPU). Over the years, NVDA’s focus has evolved from PC graphics to AI-based solutions that now support high-performance computing, gaming and virtual reality platforms. NVIDIA’s GPU success can be attributed to its parallel processing capabilities backed by thousands of computing cores necessary to run deep-learning algorithms.
NVIDIA’s expected earnings growth rate for next year is 61.5%. The Zacks Consensus Estimate for current-year earnings has improved 14.4% over the past 60 days. NVDA presently has a Zacks Rank #2 (Buy).
Qorvo, Inc. is a leading provider of core technologies and radio frequency solutions for mobile, infrastructure and aerospace/defense applications. QRVO’s reportable segments are Mobile Products and Infrastructure & Defense Products.
Qorvo’s expected earnings growth rate for next year is 41.9%. The Zacks Consensus Estimate for current-year earnings has improved 10% over the past 60 days. QRVO presently has a Zacks Rank #2.
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