Like the rest of the broader markets, semiconductor stocks to buy have operated under a cloud of uncertainty this year. Although both sides of the U.S.-China trade war demonstrated some signs of thawing relations, recent developments suggest that this economic conflict has devolved to the worst point ever.
As reported by multiple news agencies, the Trump administration earlier this week blacklisted 28 Chinese companies. Human rights concerns over Chinese treatment of the Uighur and other mostly Muslim minorities in the Xinjiang region catapulted this decision. While the front-facing issue of protecting human rights is a noble one, it invariably complicates U.S.-China relations.
Obviously, one of the worst impacted assets are semiconductor stocks. Following the announcement, the exchange-traded fund VanEck Vectors Semiconductor ETF (NYSEARCA:SMH) took a sizable hit. As you know, several U.S. companies have robust relations with Chinese tech firms. China also represents a critical revenue pathway for American semis.
Despite the ugliness, a contrarian opportunity exists for those seeking semiconductor stocks to buy. No matter what happens with the global economy, semiconductors represent progress. By its very definition, progress moves forward, not backward.
Granted, this sector features many threats which we’ll discuss. Therefore, waiting for some of these names to come down would be an ideal move. But stay away altogether? I believe these five semiconductor stocks to buy have enough critical catalysts to survive this present onslaught.
Lam Research (LRCX)
Typically, major semiconductor firms specialize in specific product categories, such as graphics processers. What makes Lam Research (NASDAQ:LRCX) stand out among other semiconductor stocks is its versatility and indispensability. Lam specializes in wafer fabrication equipment and services. According to the company’s website, “nearly every advanced chip is built with Lam technology.” Of course, this fact alone represents a long-term catalyst for LRCX stock.
Moreover, this massive demand for the company’s products and services is well reflected in the LRCX stock price. On a year-to-date basis, shares have gained over 73%. Better yet, this is a balanced rally. In the first half of this year, LRCX stock gained 42%. And in the second half so far, shares have increased in value by nearly 20%.
While arguably most semiconductor stocks face incoming turmoil from the trade war mess, Lam may get a reprieve. Simply put, the company is too valuable for the global semi industry.
Whenever individual investors face uncertainty, most financial advisors suggest portfolio diversity. Based on simple probabilities, you’re more likely to have at least a few winners if you spread out your exposure. And among semiconductor stocks, Qorvo (NASDAQ:QRVO) has its hands occupied with multiple industry subsegments, services, and products.
But what really makes me excited about QRVO stock is its expertise in the connected auto segment. Several months ago, I upgraded my ride to a very modern variant. For me, the most distinct change in the driving experience had to be its connectivity. The modern dashboard is no longer merely an information conduit but a genuine computer. With Qorvo taking the lead in this arena, I have high hopes for QRVO stock.
Additionally, the tech firm specializes in radar, communications, and electronic warfare systems for the defense and aerospace industries. Given the rapidly devolving nature of our foreign policy, I’d say QRVO stock is a relevant pick.
ASML Holding (ASML)
In life, there are two guarantees: death and taxes. With semiconductor stocks, we also have dual inevitabilities. Computer chips will decrease in size yet increase in performance. How this amazing trend continues to evolve year in and year out underlines the case for ASML Holding (NASDAQ:ASML) and ASML stock.
Specializing in a process called semiconductor lithography, ASML utilizes proprietary technologies to print distinct patterns on a silicon substrate. Another word for silicon substrate is wafer. What makes ASML stock indispensable in the broader computing industry is the above reference trend. Chips are getting increasingly smaller, which requires unthinkably acute and precise machinery for lithography.
Therefore, I’m not at all surprised that ASML stock has a similar price trend to Lam Research shares. On a YTD basis, ASML has gained over 58%. Furthermore, ASML, like LRCX, has printed a balanced rally in 2019.
Skyworks Solutions (SWKS)
Shares of Skyworks Solutions (NASDAQ:SWKS) have technically undergone what you might expect from semiconductor stocks. While SWKS stock enjoyed a mercurial lift starting in 2014, by the spring of the following year, the equity started to stall. Over the trailing four-year period, Skyworks hasn’t moved much.
Interestingly, though, SWKS stock has formed what I perceive to be a pennant formation. Starting from mid-April of this year to the present, SWKS has charted a series of lower highs but higher lows. Technical analysts believe that at the apex of this formation, the target equity will either break out or break down.
I believe the former is the more likely outcome. SWKS stock is all about the 5G rollout. Specifically, the company’s next-generation transmitters are crucial for delivering 5G services to both residences and commercial buildings. Because this rollout will continue for several years throughout the world, you should keep Skyworks on your short list of semiconductor stocks to buy.
Within this list of semiconductor stocks to buy, Ambarella (NASDAQ:AMBA) is easily the riskiest. Due to the heightened tensions in U.S.-China relations, AMBA stock has unfortunately taken the brunt of the damage. In the Oct. 8 session – a day after the White House blacklisted 28 Chinese companies – shares tanked almost 10%.
That one move immediately dropped AMBA stock below its 50-day moving average, a common barometer of nearer-term strength (or weakness). However, it’s important to note that Ambarella shares are still inside a longer-term bullish trend channel. Fundamentally, the current volatility should prove to be a viable buying opportunity because of Ambarella’s specialty: vision processors armed with artificial intelligence.
These AI processors offer multiple applications. In my opinion, the most important is security. As this technology advances, operators will be able to identify and respond to threats before they strike. Anything that can prevent a 9/11-style attack is a worthwhile endeavor. Thus, I have zero issue backing AMBA stock among my semiconductor picks.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.