NVIDIA Stock – 5 Winners to Pick as Global Semiconductor Sales Continue to Soar

The semiconductor industry has continued to showcase its bullish run so far in 2021 following a stellar performance in 2020 despite the pandemic-induced macroeconomic crisis.

The global semiconductor industry sales grew 14.7% year over year to $39.6 billion in February 2021, the Semiconductor Industry Association (SIA) reported on Monday citing data compiled by the World Semiconductor Trade Statistics (WSTS). This increase follows year-over-year growth of 13.2% registered in January 2021 and 6.8% recorded for full-year 2020.

SIA noted that Semiconductor sales in February increased across all regions, with China recording the largest growth of 18.9% mainly owing to lesser sales in the year-ago period because of the COVID-19 pandemic. Asia Pacific/All Other, the Americas, Japan and Europe registered a year-over-year increase of 18.2%, 9.7%, 7.6% and 6.8%, respectively.

What’s Fueling the Semiconductor Demand?

The pandemic has brought about a rapid shift to digitization, spurring demand for various products and devices dependent on chips for their functioning.

The global health crisis has necessitated the use of PC systems, be it for remote work, web-based learning, video conferencing, video gaming, social media, consumer entertainment and streaming or online shopping.

Meanwhile, over the years, the automotive sector has also evolved to include more electronic components in vehicles that rely on semiconductors. Markedly, following a dip in sales last year due to the pandemic, auto sales are also looking to make a comeback this year, with the IHS Markit predicting global light vehicle sales to shoot up 9%.

Additionally, robust recovery in smartphone sales is boosting demand for semiconductors. According to the latest forecast by Gartner, worldwide sales of smartphones will likely be up 11.4% year on year to 1.5 billion units in 2021. This suggests a sharp improvement from the 10.5% decline registered in 2020.

Gartner analyst Anshul Gupta noted that “The combination of delayed smartphone replacements and the availability of lower end 5G smartphones are poised to increase smartphone sales in 2021.” The global research and advisory firm stated that 5G smartphones will account for 35% of the total shipments this year.

Long-Term Prospects Look Promising

Semiconductors are the backbone of the current-day technology-driven economy. The digitization across industries, adoption of cloud computing, as well as the integration of AI and machine learning are likely to fuel demand for semiconductors.

The accelerated deployment of 5G technology — the next-generation wireless revolution — is likely to propel further growth. Apart from this, blockchain, IoT, autonomous vehicles, AR/VR and wearables are other growth prospects.

Per the latest World Semiconductor Trade Statistics data, the global semiconductor market is now predicted to improve 10.9% in 2021, based on double-digit growth of memory, logic and sensors. The forecast for 2021 is higher than the previously-projected growth of 8.4%.

What Should Investors Do?

Considering growth prospects of the chip makers, it makes sense to invest for long-term gains.

Here we’ve picked five semiconductor stocks that are well positioned to benefit from the above-mentioned trends. Apart from having solid fundamentals, these stocks sport a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Our Picks

Vishay Intertechnology VSH is well poised to capitalize on the growing proliferation of applications related to passive electronic-component devices and the increasing demand for sophisticated electronic-component designs.

Further, its strong thermistor offerings will likely benefit from the growing adoption of building and home automation systems, the increasing use of temperature sensors in the automotive industry, and rising applications of portable and advance healthcare equipment across the globe.

The recent launch of NTCALUG family of NTC lug thermistors makes this Zacks Rank #1 company well poised to gain strong traction among automotive, consumer and industrial applications as the NTCALUG family features accurate temperature-sensing capability.

The Zacks Consensus Estimate for its 2021 earnings has been revised upward by 30% in 60 days’ time to $1.73 per share, suggesting a 88% surge from the figure reported in the year-ago quarter.

Vishay Intertechnology, Inc. price

Vishay Intertechnology, Inc. price | Vishay Intertechnology, Inc. Quote

Micron Technology MU is gaining from solid demand for memory chips from PC and smartphone manufacturers, cloud-computing providers and acceleration in 5G adoption.

This Zacks Rank #2 company has been witnessing stronger memory-chip demand from PC manufacturers and data-center operators. Furthermore, 5G adoption beyond mobile is anticipated to spur demand for memory and storage, particularly in IoT devices and wireless infrastructure. Also, focus on improving its cost structure and increasing the mix of high-value solutions in the company’s portfolio will likely boost margins.

The Zacks Consensus Estimate for fiscal 2021 earnings has been revised upward by 15.9% in 30 days’ time to $4.52 per share, calling for 59.7% year-over-year growth.

Micron Technology, Inc. price

Micron Technology, Inc. price | Micron Technology, Inc. Quote

Applied Materials AMAT is one of the world’s largest suppliers of fabrication equipment for semiconductors, flat panel liquid crystal displays (LCDs), and solar photovoltaic (PV) cells and modules.

This Zacks Rank #2 company is benefiting from portfolio strength, its expanding position in memory and increasing new design wins. Additionally, growth opportunities across specialty nodes and the new nodes ramp across foundry, logic, NAND, and DRAM are estimated to benefit Applied Materials in the near term.

The Zacks Consensus Estimate for fiscal 2021 earnings has moved 19.4% north in the past 30 days to $5.98 per share, indicating a year-over-year increase of 43.4%.

Applied Materials, Inc. price

Applied Materials, Inc. price | Applied Materials, Inc. Quote

Analog Devices’ ADI communications market is anticipated to perform well in 2021, backed by strength of the wireless segment. The accelerated build-out of TD-LTE in China, continued 5G network densification activities in the United States and deployments in Europe are likely to aid this Zacks Rank #2 company’s communications segment.

Moreover, strength in the company’s industrial segment, and increased focus on innovation and operational execution are key positives.

The Zacks Consensus Estimate for fiscal 2021 is up 5.4% in the past 30 days to $6.01 per share, suggesting a jump of 22.4% year on year.

Analog Devices, Inc. price

Analog Devices, Inc. price | Analog Devices, Inc. Quote

NVIDIA (NVDA) is benefiting from the pandemic-induced work-from-home and learn-at-home wave. The company is poised to gain from solid demand for GeForce desktop and notebook GPUs, which is anticipated to boost gaming revenues. Additionally, a surge in Hyperscale demand is a tailwind for this Zacks Rank #2 company’s Data-Center business.

Apart from this, the Arm acquisition is expected to aid NVIDIA in offering end-to-end ecosystem of technology across the data center, IoT, autonomous vehicles and mobile domains. NVIDIA is now well positioned to upscale its inference technology, drivers, and accelerators by utilizing Arm’s robust architecture and chip designs.

The Zacks Consensus Estimate for fiscal 2022 earnings has been revised upward by 10 cents in the past 30 days to $13.37 per share. The figure calls for an increase of 33.7% on a year-over-year basis.

NVIDIA Corporation price

NVIDIA Corporation price | NVIDIA Corporation Quote

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