The 7 Best Semiconductor Stocks for 2022 – WTOP | Episode Movies

Despite concerns about the economy, the glass is half full for these seven semiconductor stocks. Semiconductor stocks had an uninspiring 2022.…

Despite concerns about the economy, the glass is half full for these seven semiconductor stocks.

Semiconductor stocks had an uninspiring 2022. After a global chip shortage in 2021, demand has fallen significantly. Sales for many high-end electronics, such as laptops and TVs, have fallen significantly from last year’s record levels. As stay-at-home trends have eased, consumers are focusing their spending on other things, such as travel and leisure items. In addition, the wave of inflation has further impacted consumers’ purchasing power for electronics. However, semiconductors aren’t as doomed as investors might think. The $280 billion CHIPS and Science Act included $52 billion in grants for domestic semiconductor fabs. And as it turns out, some semiconductor companies’ earnings haven’t been as bad as expected, either. Here are seven semiconductor stocks that are holding their own despite the mixed conditions for the industry.

Monolithic Power System Inc. (Ticker: MPWR)

Monolithic Power System is a diversified semiconductor company. Known for its in-house research and development, it has developed a variety of different products over the years. Monolithic currently serves the computing, automotive, industrial, infrastructure and consumer markets. Its chips support everything from digital cockpits to data centers to building automation systems and 5G wireless units. Admittedly, power isn’t the most glamorous part of the chip business, but proper fuses, lighting, power modules, and battery management are essential for modern electronics and devices to function properly and have long lifespans. Monolithic takes a rigorous approach to budgeting and capital deployment. Shares are up 2,050% over the past decade. However, they are down 27% over the past 12 months due to the current jitters in the industry. That gives investors a chance to buy this growth machine at a reasonable price-to-earnings ratio of 24.

Intel Corp. (INTC)

While some semiconductor companies have managed to post solid earnings this year, Intel has not been spared the industry downturn. The company’s last two earnings reports have been depressing, to say the least. Not surprisingly, investors dumped the stock, pushing it to new multi-year lows. For traders looking for near-term strength, Intel is a pass today. However, long-term investors get a bargain. For one, Intel is a direct beneficiary of the CHIPS Act, which should help fund its new manufacturing facilities in Columbus, Ohio. Intel also has one of the largest research and development teams in the technology space. The company currently spends more than $15 billion annually on research and development. Intel is going through tough times right now, but don’t forget the chip giant. In the meantime, investors can enjoy the company’s generous dividend yield of 4.9%.

Texas Instruments Inc (TXN)

Like Intel, Texas Instruments should be a major recipient of CHIPS Act support. The company is building four new manufacturing facilities, or fabs, that will produce state-of-the-art analog and embedded processing chips. These facilities will be located in Richardson, Texas and will help fuel the growth of the domestic electronics supply chain. Analog chips in particular have a wide range of applications and are incorporated into countless types of industrial products. Think of things like remote monitoring, security, connected cars, IoT applications and so on. Analog chips are much more than just the computer for a smartphone or a television. They drive modern industrial processes across the board. This should make Texas Instruments a secular growth story in the 2020s. For now, with this year’s sell-off, shares are yielding 21 times forward earnings while offering a dividend yield of 2.8%.

Taiwan Semiconductor Manufacturing Co.Ltd. (TSM)

There is a popular media narrative that the semiconductor industry is currently in a steep decline. And there are definitely pockets of it that are struggling. However, things might not be as bad as feared. Just look at the latest data from Taiwan Semiconductor, which reported a stunning 56% increase in sales for October 2022 compared to the same month in 2021. While demand for some specific products has slowed, the semiconductor industry as a whole is still spending heavily to replenish inventories to make up last year’s deficits. Admittedly, Taiwan Semiconductor faces geopolitical risks. However, the company has built new manufacturing capacity in Arizona to reduce the risk associated with China. The troubling economic and political headlines have pushed TSM shares down 40.2% year-to-date through November 10th. Earnings have actually increased, however, and shares are now selling for just 11 times expected earnings.

Samsung Electronics Co.Ltd. (SSNLF)

Samsung is a diversified technology company known for smartphones and TVs, among other high-end consumer products. But the Korean tech titan is also a major player in the semiconductor space, producing many chips for 5G, mobile and artificial intelligence applications. These flow not only into Samsung’s own electronics. It also sells to big-name customers like Nvidia Corp. (NVDA) and International Business Machines Corp. (IBM). Samsung’s semiconductor view is particularly interesting now that it should be a beneficiary of the CHIPS Act. Samsung is building a new $17 billion 5 million square foot facility near Austin, Texas. That’s strategic. In addition to supporting the CHIPS Act, the Samsung facility will be in close proximity to other semiconductor companies such as Texas Instruments, creating regional economies of scale. Finally, Samsung’s American presence should help attract more customers with national security concerns, such as B. US government or military contracts.

Axcelis Technologies Inc. (ACLS)

A great way to take advantage of all the new semiconductor manufacturing assets is to invest in companies that make industry-specific tooling. For example, Axcelis is a Massachusetts-based company that has been providing ion implantation systems to semiconductor fabs for over 40 years. Ion implants are a niche opportunity. But with an estimated market value of $2.2 billion, it’s one that can support Axcelis’ business. The company currently has around 3,000 installed tools for customers in 32 countries. This gives it plenty of scope to make money, both by selling to new semiconductor fabs and by generating recurring revenue from maintaining the existing unit base. Most of the major semiconductor categories—memory, logic, foundry, power, and image sensing—all use Axcelis products. Shares are attractively valued and will only be up 15 times forward earnings, though the company expects revenue to grow at least 30% this year.

Ambarella Inc. (AMBA)

Ambarella designs system-on-chip circuits for a variety of video and assisted vision products. These performance capabilities include advanced driver assistance systems (ADAS), autonomous driving, video security, and robotics applications, among others. The company’s technology enables the capture of large amounts of data, especially high-resolution video, and then compressing and processing the data with low power consumption. As the world adopts increasingly advanced automobiles and other autonomous technologies, this ability to capture large volumes of high-quality video data should prove invaluable. Ambarella was probably launched too early. Shares initially rallied, then flopped years ago on a short-lived sales spurt for GoPro Inc. (GPRO) cameras. While action cameras didn’t ultimately have a major impact, the next generation of high-definition video products should see far broader adoption. Ambarella is already profitable, and analysts see double-digit sales growth in 2023 and 2024.

The 7 Best Semiconductor Stocks for 2022:

Monolithic Power System Inc. (MPWR)

Intel Corp. (INTC)

Texas Instruments Inc (TXN)

Taiwan Semiconductor Manufacturing Co.Ltd. (TSM)

Samsung Electronics Co.Ltd. (SSNLF)

Axcelis Technologies Inc. (ACLS)

Ambarella Inc. (AMBA)

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The 7 best semiconductor stocks for 2022 originally appeared on usnews.com

Update 11/11/22: This story was previously published and updated with new information.

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