Moore’s Law says that the number of transistors on a silicon chip will double every two years. That premise of ever-expanding computing power has been the driving force behind the modern digital revolution. It has also meant that semiconductor stocks have been a force to be reckoned with.
But not every company that has built its business around silicon is worth investing in. The road is littered with failures like 3dfx Interactive. To stay safe and reap big gains, these seven picks should be at the top of your list if you want a piece of the semiconductor action:
- Advanced Micro Devices (NASDAQ:AMD)
- Intel (NASDAQ:INTC)
- Maxim Integrated Products (NASDAQ:MXIM)
- Qorvo (NASDAQ:QRVO)
- Skyworks Solutions (NASDAQ:SWKS)
- Analog Devices (NASDAQ:ADI)
- Broadcom (NASDAQ:AVGO)
Some have been in business since the PC era began, while several of these companies are relative newcomers. What they all share in common is a focus on silicon chips, and stocks that are going to continue to be strong performers.
Best Semiconductor Stocks: Advanced Micro Devices (AMD)
First up is a stellar performer among semiconductor stocks. Advanced Micro Devices was the best-performing stock in the S&P 500 in 2019, posting 148% growth. AMD stock is up 9% so far in 2020, despite the novel coronavirus pandemic.
AMD has been all but written off twice. First, after the 2000 dot-com crash, and again in 2008, when PC shipments began to stall, and AMD’s processors and graphics cards just weren’t competitive.
All of that has changed in recent years. Under the direction of CEO Lisa Su, AMD has been relentless in its development of new chip architecture. Its Ryzen processors have been taking market share from Intel in the PC space, including an aggressive push into laptops for 2020. The company’s EPYC processors are winning marketshare in the lucrative data center market. Its Radeon graphics cards are giving market leader Nvidia (NASDAQ:NVDA) fits. And both the Xbox Series X and PlayStation 5 video game consoles will be powered by custom AMD chips when they launch later this year.
Above all, as I wrote earlier this year, AMD maintains an ambitious vision for the future. Look for that vision to continue powering the company’s success.
Intel is the senior statesman among these semiconductor stocks. It has been focused on silicon chips since 1968. In fact Gordon Moore of Moore’s Law fame is Intel’s cofounder.
One of Intel’s key strengths is its resilience. Intel has faced challenges over the past five years that would hobble many other companies.
Even as Intel’s core PC market continues to shrink, AMD has been winning over consumers and manufacturers with its Ryzen processors. Intel has faced crippling chip shortages plus fallout from the Meltdown and Spectre chip vulnerabilities. It abandoned the smartphone processor market, and last year dropped its smartphone modem business, selling it to Apple (NASDAQ:AAPL). Adding to the gloomy news, it has been reported that Apple is on the verge of ditching Intel processors in its Mac PCs.
So why the nod to Intel? Despite the many challenges, Intel remains a dominant force. Its new 10nm chips are beginning to hit the market, and production delays are expected to be resolved. Intel Xeon processors remain the chip of choice in the data center market, and that market is growing. Last year, Intel showed off its own Xe graphics cards, which will position it to take on AMD and Nvidia in that market. Intel is also dominant in the growing Internet of Things (IoT) sector — a key component of smart home and self-driving car technologies.
Perhaps the strongest argument is that despite the many challenges, INTC stock continues to perform. Over the past five years, it’s up 105%.
In addition, Intel is generous with its dividends. Its latest quarterly dividend was 33 cents per share, paid on June 1.
Maxim Integrated Products (MXIM)
Maxim Integrated is another of those semiconductor stocks with a long history. This company dates back to the 1980s and specializes in integrated circuits (ICs). These are the embedded chips used in a huge variety of products, ranging from cars to heath trackers to automated factory equipment.
Maxim Integrated is positioned to benefit from some of the most promising areas of technology growth, including wearables, 5G wireless, automotive IoT, solar cells, military, aerospace and smart building automation.
MXIM stock has posted growth of 79% over the past five years. Although it’s still under water for 2020, it has been recovering from the March market selloff. At its current price, MXIM stock is up nearly 40% from its March 16 close.
Qorvo is a relative newcomer among the semiconductor stocks scene. Founded in 2015, Qorvo describes itself as providing: “the industry’s broadest portfolio of critical enabling technologies with expertise in mobile devices, complex infrastructure and global aerospace and defense applications.”
The RF business encompasses 5G and Wi-Fi 6, the latest tech in a red-hot communication sector. In 2019, Qorvo announced it had shipped 100 million RF devices for use in 5G infrastructure. On the foundry side, Qorvo specializes in custom solutions for the U.S. Department of Defense. That’s a market that is always growing, no matter what the economic situation. Power management includes battery management components and power loss protection.
Qorvo is growing through acquisition as well. Its latest purchase took place earlier this year, when it completed the purchase of Decawave — a company specializing in ultra-wideband (UWB) technology.
QRVO stock was up an impressive 91% in 2019. It has been hit hard in 2020, but since bottoming out in March has re-gained nearly 66%.
Expect that recovery to continue, based on the company’s latest guidance: “While our June quarter guidance reflects the ongoing demand and supply effects of COVID-19, we are encouraged by continued growth in 5G handsets and infrastructure, and we remain confident in the long-term growth drivers of our business.”
Skyworks Solutions (SWKS)
Skyworks Solutions’ primary product is radio frequency semiconductors used by smartphones to communicate with wireless networks.
From 2002 through 2008, SWKS stock bounced around below the $10 level, but since 2009 it has been on a growth path. That’s no surprise, given that Apple is Skyworks’ largest customer, and the iPhone was the hottest-selling smartphone on the planet. That relationship can have its downside — 2018 saw SWKS stock slide, a reaction blamed on lower iPhone demand.
However, 5G adoption is expected to spur iPhone demand this fall. That prospect helped to once again light a fuse under SWKS, starting in October. Before the coronavirus pandemic spooked the markets and spoiled the party, Skyworks’ stock had gained 70% since the start of October. Even after a March plummet, the prospect of 5G iPhones boosting revenue for the at least the next few years has helped SWKS to recover and more. Now at the $132 level, it’s up nearly 9% so far in 2020.
Analog Devices (ADI)
This Massachusetts-based semiconductor company specializes in analog, mixed-signal and digital signal (DSP) integrated circuits.
Its ICs can be found in products that are on the leading edge of technology, sectors that are all expected to see massive growth in coming years. This includes electric cars, self-driving vehicles, 5G infrastructure, industrial automation and smart sensors (Industry 4.0) and digital health solutions.
Analog Devices claims over 100,000 customers, worldwide. The widespread use of its products, combined with a big presence in new technology sectors has served the company and its investors well. In addition, ADI has been rewarding investors with dividends and share buybacks — to the tune of $340 million last quarter.
ADI stock is up 85% over the past five years, and has even managed to stay afloat in 2020.
Finally, another instantly recognizable semiconductor giant: Broadcom. The Singapore-based company is known for its presence in the data center and network infrastructure sectors. While other tech companies have taken a hit from the coronavirus pandemic, the move to working from home has boosted Broadcom’s balance sheet. In its most recent quarter, earnings of $5.74 billion were up 4% year-over-year.
Broadcom is not content to sit on its own semiconductor IP. Acquisitions are a key part of its strategy. It even took a shot at purchasing Qualcomm (NASAQ:QCOM) at the height of that company’s fight with Apple. The proposed $117 billion deal would have been the biggest ever tech merger. However, in 2018, President Trump blocked it, citing security concerns.
The company moved on quickly. In 2019, Broadcom snapped up enterprise security provider Symantec, for $10.7 billion. The move bolstered Broadcom’s cloud offerings and helped to diversify from its reliance on hardware.
AVGO stock is still down slightly for 2020, but it’s well on the path of recovery. With 126% growth over the past five years and a proven track record of thinking big, Broadcom is a winner among semiconductor stocks.
Louis Navellier had an unconventional start, as a grad student who accidentally built a market-beating stock system — with returns rivaling even Warren Buffett. In his latest feat, Louis discovered the “Master Key” to profiting from the biggest tech revolution of this (or any) generation. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.