8 Semiconductor Stocks to Watch as Google Makes Its Own Chips


semiconductor stocks - 8 Semiconductor Stocks to Watch as Google Makes Its Own Chips

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In recent months, we’ve seen major consumer tech firms announce that they were planning on using homemade chips rather than outsource their chip development.

In a world of growing specialization when even big companies stick to their knitting within their strategic sectors, this seems to cut across the grain.

With all the great chipmakers out there, why build your own chips? Well, one answer is, these companies know their products and their goals better than anyone. Another is, they’ve been building chips for a while anyway, so why not bring the operation in house?

Google’s Tensor chip has been around in the company’s machine learning division since 2017. It’s likely this will be a modified version for this system on a chip (SoC) Pixel version. That also means the devices need plenty of other chips to build the devices.

The semiconductor stocks featured below remain the best in the business.

  • Ambarella (NASDAQ:AMBA)
  • Amkor Technology (NASDAQ:AMKR)
  • Diodes Inc (NASDAQ:DIOD)
  • Enphase (NASDAQ:ENPH)
  • Nvidia (NASDAQ:NVDA)
  • Lattice Semiconductor (NASDAQ:LSCC)
  • SiTime (NASDAQ:SITM)
  • United Microelectronics (NYSE:UMC)

Semiconductor Stocks to Watch: Ambarella (AMBA)

Ambarella (AMBA) logo on a corporate building

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You might not have heard of this name, but you have heard of some of its big clients. AMBA is the semiconductor stock that makes video compression for all those digital video cameras out there.

It also licenses its technology to a number of other companies that want quality, durable, small cameras for any number of tasks. It was the engine behind the first solid-state camcorders and remains a key player in studio television cameras. Action cameras are just one piece of its growth potential. Moving forward, autonomous vehicles, dash cams in smart vehicles, drones and other markets will expand significantly. And AMBA is there.

AMBA has barely moved year-to-date, but its Q1 numbers were above expectations and it should strengthen as supply chain and production gridlocks ease.

This stock has a Portfolio Grader B rating.

Amkor Technology (AMKR)

In Ultra Modern Electronic Manufacturing Factory Design Engineer in Sterile Coverall Holds Microchip with Gloves and Examines it.

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Technically, AMKR has been around since 1935. But it wasn’t until the 1970s when it became involved in the chipmaking market.

Today, it’s one of the leading semiconductor stocks. However, its primary business isn’t making or designing chips, it’s packaging and testing chip sets.

Basically, packaging chips means connecting the chips to an external environment, like a printed circuit board. It also means keeping the chips protected from damage in shipping and when in use. And testing becomes the quality control for the packaging.

That means AMKR can do its work as long as there’s volume, which is expanding once again. What’s more, AMKR is headquartered in Arizona, so it will benefit from the new administration’s “Buy America” initiative.

AMKR stock is up 64% year-to-date, yet trades at a current price-to-earnings ratio below 13x.

This stock has a Portfolio Grader B rating.

Semiconductor Stocks to Watch: Diodes Inc (DIOD)

silicon wafer in die attach machine in semiconductor manufacturing

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While its name is clear, DIOD makes it way into this list of semiconductors stocks because it supplies the components for chips and chipsets rather than the chips themselves.

One surprising thing about the company is it started in 1959 in Plano, Texas. And yet, in the many decades of the tech boom, DIOD is a pretty low-key player. It now has 28 locations around the world where its more than 7,000 employees work.

With 2019 revenue running around $1.3 billion and a market cap around $4 billion, DIOD has carved out niche that’s in high demand in good times and bad.

DIOD stock has gained 25% year to date and it’s well positioned to expand as semiconductor stocks supply chains get back on track.

This stock has a Portfolio Grader B rating.

Enphase (ENPH)

image of a hand holding a bright light bulb outdoors with trees in the background

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When you think ENPH, don’t think computers. Think solar. While it joins various semiconductor stocks in this list, ENPH actually makes microinverters. And it’s one of a select few companies that make them with enough volume to keep up with the solar industry.

Photovoltaic panels convert sunlight to heat to electricity. That electricity is direct current (DC). Most residential and commercial properties in the U.S. run on alternating current (AC). The grid runs on AC.

Microinverters convert DC power from solar to AC to power houses and businesses, return to the grid or store in batteries. Needless to say, the stock has taken off as renewables and ESG investing have boosted interest in this unique stock.

ENPH is up significantly in the past 12 months but it has lost almost 7% year-to-date. It’s still expensive by traditional measures, but it’s practically the only game in town and this town is going solar.

This stock has a Portfolio Grader B rating.

Semiconductor Stocks to Watch: Nvidia (NVDA)

A racecar featuring Drive PX 2 technology from Nvidia (NVDA) parked.

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Graphic processing units (GPUs) translate data into images. Think about video games, car cameras, cloud computing and Big Data visualization, virtual reality and teleconferencing, just to name a few massive markets.

NVDA is the leading GPU maker in the world at this point. It’s also the standard bearer for cutting edge GPUs. So much so, that most major computer and device makers default to NVDA GPUs in their higher-end products.

Certainly other major semiconductor stocks build quality GPUs, but NVDA has established itself as the sector leader and is big enough to keep its customers supplied.

NVDA stock has gained 56% year-to-date and trades at a high P/E, but it sits at the top of so many key markets most metrics don’t do its future justice. Its $484 billion market cap is testament to that.

This stock has a Portfolio Grader B rating.

Lattice Semiconductor (LSCC)

a machine manufactures semiconductor chips in a factory setting

Source: Shutterstock

How do you get computer code to move a robotic arm to weld a seam on a production line? You use programmable logic devices. They’re the middleman between software and creating an action.

You could also think about something more individually specific, like a sensor seeing that you’re about to hit the car in front of you. First the programming tells your car to send out a warning tone. If that doesn’t work, it hits the brakes.

LSCC has been in this sector since 1983. While there are other semiconductor stocks in this sector, including the big chipmakers, LSCC has a great client base and a very good reputation in the industry.

The fact is, LSCC is in the right spot for significant growth in robotics, autonomous vehicles and other sectors. LSCC stock is up 24% year-to-date and will get a big boost as automakers start building again.

Semiconductor Stocks to Watch: SiTime (SITM)

a close up image of a semiconductor

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Micro-electromechanical systems (MEMS) are ultra-tiny mechanical systems that combine with electrical systems at the nanotech level. In the case of SITM, it builds MEMS that run the clocks smaller than a pinhead for use in mobile phones, computers and embedded computing devices like cars … or toasters.

To-date, SITM has 2 billion of its MEMS installed in various devices around the world.

Previously, these timing devices were run by quartz. But SITM has gone next generation to find an even better solution.

SITM launched in 2005, but now that we’re entering a new mobile computing era that includes smart transportation and devices, the market for SITM products continues to expand. It’s a very interesting player among these semiconductor stocks.

SITM has risen 82% year-to-date, and it continues to expand its reputation and products.

This stock has a Portfolio Grader A rating.

United Microelectronics (UMC)

Close-up Presentation of a New Generation Microchip. Gloved Hand Holding Piece of Technological Wonder.

Source: Shutterstock

You may have heard the term “fabless semiconductor company” thrown around. Basically, there has been a transition in recent years from chipmakers that make (fabricate) their own chips to ones that design and engineer chips but don’t make them (fabless).

What that means for a new generation of chip companies is that they don’t have build operate and maintain multi-billion-dollar chip fabrication plants (aka, foundries). Some of the big semiconductor stocks continue go the vertically integrated route, including foundries.

But many of the newer semiconductor stocks have chosen to go fabless. And one of their key strategic partners is UMC, one of the biggest foundries in the world. It was also the first semiconductor stock listed in Taiwan. Its now the third largest foundry in the world and the best value.

UMC stock has risen 30% year-to-date, has a 2% dividend and trades at a current P/E below 17x.

This stock has a Portfolio Grader A rating.

On the date of publication, Louis Navellier has positions AMKR, ENPH, NVDA, LSCC, SITM, and UMC in this article. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. The InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.

The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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