These are the best semiconductor stocks to buy right now.
A global chip shortage has disrupted the semiconductor industry in the past two years as demand continues to outpace supply. In August, President Joe Biden signed the $52 billion bipartisan Chips and Science Act to help boost domestic U.S. semiconductor manufacturing. Unfortunately, it may take a while for the new investment to alleviate the ongoing supply disruptions. However, semiconductor bulls say demand from online gaming, cloud computing, artificial intelligence, 5G wireless networks and next-generation auto technology should maintain secular tailwinds for semiconductor stocks in the long term. Here are eight top semiconductor stocks to buy in 2023, according to CFRA Research.
Taiwan Semiconductor Manufacturing Co. Ltd. (ticker: TSM)
Taiwan Semiconductor Manufacturing is the world’s largest pure-play semiconductor foundry. Analyst Hazim Bahari says Taiwan Semiconductor has an impressive long-term growth outlook given the company has a greater than 90% market share of the most advanced foundry processes of 7 nanometers or less. In addition, Bahari says the company generates impressive free cash flow and has a strong balance sheet that should help it invest in expanding its technological leadership. Bahari says AI, cloud computing and 5G applications will help consumer-driven demand weakness recover in 2024 and beyond. CFRA has a “strong buy” rating and $87 price target for TSM stock, which closed at $78.07 on Jan. 6.
Nvidia Corp. (NVDA)
Nvidia is a leader in high-end graphics and mobile processors for personal computers, workstations and mobile electronic devices. Analyst Angelo Zino says Nvidia has tremendous long-term growth potential. Zino says the company’s first Hopper-based graphics processing units, or GPUs, will drive momentum in data center sales. In addition, its entry into the central processing unit, or CPU, market will be a bullish catalyst in 2023. Zino says Nvidia’s auto business is also booming, and its auto revenue run rate more than doubled in the third quarter. CFRA has a “buy” rating and $200 price target for NVDA stock, which closed at $148.59 on Jan. 6.
Broadcom Inc. (AVGO)
Broadcom is a diversified global analog semiconductor supplier. Zino says Broadcom has an attractive valuation and its pending $61 billion acquisition of VMware Inc. (VMW) will help Broadcom generate an impressive amount of free cash flow and earnings before interest, taxes, depreciation and amortization, or EBITDA. If the deal passes scrutiny from regulators, VMware will contribute high-margin software revenue and help Broadcom diversify away from semiconductors. Zino projects 6.4% revenue growth in fiscal 2023 and 3.7% growth in fiscal 2024. Broadcom also pays an attractive 3.1% dividend, a rarity among semiconductor stocks. CFRA has a “buy” rating and $600 price target for AVGO stock, which closed at $588.43 on Jan. 6.
ASML Holding NV (ASML)
ASML is the world’s third-largest semiconductor equipment supplier. Analyst Keven Young says ASML’s market positioning as a lithography systems supplier for leading logic and memory customers is essentially a monopoly. In addition, Young says ASML is a market leader in supplying immersion systems for trailing-edge manufacturers. The ongoing migration to more advanced nodes will be a medium-term demand driver for ASML, Young says. A favorable revenue mix will support margins, and CFRA projects ASML will generate 20% revenue growth in 2023. CFRA has a “strong buy” rating and $707 price target for ASML stock, which closed at $595.85 on Jan. 6.
Advanced Micro Devices Inc. (AMD)
Even after declining 53% in the past year, shares of microprocessor and graphics semiconductor stock Advanced Micro Devices are still up more than 440% overall in the past five years, the best performance of any semi stock on this list. Zino says the ramp of AMD’s next-generation EPYC processors will help the company gain significant CPU data center market share. In addition, he anticipates continued momentum from AMD’s GPU products and expects the company will use its cash flow to improve its balance sheet. CFRA has a “buy” rating and $85 price target for AMD stock, which closed at $63.96 on Jan. 6.
Applied Materials Inc. (AMAT)
Applied Materials is the world’s largest wafer fabrication equipment supplier for the semiconductor industry. Young says Applied Materials shares are trading at a discounted valuation to historical levels when they should be trading at a premium valuation. Young says foundry and logic technology upgrades continue to drive etch and deposition tool demand. He is particularly bullish on Applied Materials’ large amount of recurring revenue. Young projects revenue growth will rebound to 9% in fiscal 2024 after falling 8% in fiscal 2023. CFRA has a “strong buy” rating and $145 price target for AMAT stock, which closed at $104.27 on Jan. 6.
Lam Research Corp. (LRCX)
Lam Research is the world’s largest manufacturer of semiconductor etch products. Young says Lam shares are attractively valued and the visibility of its financial outlook is improving. He says memory product customers are likely increasing their investments, and foundry spending will benefit from easing supply constraints. Young projects 6% revenue growth in fiscal 2023 despite $2 billion sales growth associated with export controls. These export controls will also pressure margins, but Young anticipates Lam will maintain gross margins of at least 44.5% in fiscal 2023 and 2024. CFRA has a “buy” rating and $542 price target for LRCX stock, which closed at $445.27 on Jan. 6.
Micron Technology Inc. (MU)
Micron Technology specializes in semiconductor memory products, including DRAM and NAND flash memory. Zino is bullish on both Micron’s valuation and its long-term memory content growth outlook. He says Micron’s strategic shift toward advanced, higher-value products will help support margins. Zino says Micron is approaching trough revenue for its current cycle and anticipates demand will increase gradually throughout 2023. Reopening in China, CPU launches and improving customer inventories will be bullish catalysts for Micron in coming quarters. Zino projects revenue growth will recover to 36% in fiscal 2024. CFRA has a “buy” rating and $56 price target for MU stock, which closed at $56.77 on Jan. 6.
8 best semiconductor stocks to buy amid a chip shortage:
— Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)
— Nvidia Corp. (NVDA)
— Broadcom Inc. (AVGO)
— ASML Holding NV (ASML)
— Advanced Micro Devices Inc. (AMD)
— Applied Materials Inc. (AMAT)
— Lam Research Corp. (LRCX)
— Micron Technology Inc. (MU)
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8 Best Semiconductor Stocks to Buy Amid a Global Chip Shortage originally appeared on usnews.com
Update 01/09/23: This slideshow was previously published at an earlier date and has been updated with new information.
