There are several sectors that are seeing a notable surge in investor interest. Electric cars and materials related to EV batteries are both hot. Companies that are set to benefit from the coming government spending on infrastructure are popular. However, one of the most compelling sectors continues to be semiconductors. With a seemingly endless global shortage of chips, semiconductor stocks are a great way to pad your portfolio with companies that have the “problem” of a bottomless demand for their products. A demand that is reaching a fevered pitch as the holiday season approaches.
Earlier this year, I listed a collection of semiconductor stocks that were surging from the chip shortage. Nine months later — with no sign of supply coming anywhere near to catching up with demand — it’s time to take another look. This time around, I’m skipping some of the obvious industry giants.
Instead, these seven stocks are companies that you may not have heard of. But each is a key part of the global semiconductor industry and each is positioned to benefit from the insatiable demand for silicon chips.
- Ambarella (NASDAQ:AMBA)
- Canaan (NASDAQ:CAN)
- Himax Technologies (NASDAQ:HIMX)
- ChipMOS Technologies (NASDAQ:IMOS)
- Meta Materials (NASDAQ:MMAT)
- ON Semiconductor (NASDAQ:ON)
- SiTime (NASDAQ:SITM)
The companies may not be household names, but these semiconductor stocks offer big growth potential. Their products are found in a wide range of commercial and consumer tech, meaning demand is becoming even more intense as the holiday shopping season gets underway. And each earns at least a “B Total grade in Portfolio Grader.
Semiconductor Stocks to Buy: Ambarella (AMBA)
Based in California, Ambarella is a fabless semiconductor stock. The company specializes in designing chips used in high resolution video applications, including solutions capable of 8K video encoding/decoding. Ambarella’s customers use its chips in applications, including action and drone cameras, security cameras, retail security monitoring, robotics, plus automotive safety and autonomous driving systems.
Ambarella is in the thick of things when it comes to high growth sectors like the Internet of Things (IoT), robotics and autonomous vehicles. Over the past 12 months, AMBA stock has rewarded investors with a 220% return.
At the time of publication, AMBA stock earned a “B” Total grade rating in Portfolio Grader.
It’s hard to understate the impact cryptocurrency has had on the semiconductor industry. All those crypto-mining rigs require massive investments in silicon. China’s Canaan is a bit of an unknown in the U.S., but this company is well-known in the Bitcoin (CCC:BTC-USD) world.
Canaan designs application-specific integrated circuits (ASICs) that are used in Bitcoin mining rigs. At one point in 2019, Canaan’s ASICs accounted for nearly 22% of the total computing power being deployed in Bitcoin mining rigs sold globally.
If you’re worried about the crypto clampdown in China, Canaan’s customer base is global. It has continued to book big orders for Bitcoin mining rigs from companies across the world. In its latest quarter, revenue was up 507% year-over-year, marking its strongest ever quarterly performance. In addition, the company is hedging its bets by leveraging its expertise to launch its own AI chip.
CAN stock is up 214% over the past 12 months, but it has slumped 71% from April highs thanks in no small part to crypto market volatility. This makes CAN a tempting option among this crop of semiconductor stocks.
The current Portfolio Grader Total grade for CAN stock is “B.”
Semiconductor Stocks to Buy: Himax (HIMX)
Himax is one company on this list that has fairly wide recognition. That’s because Himax is a leader in display imaging processing technology. Its chips are found in a wide array of products including TVs, laptops, smartphones and tablets. You’ll also find Himax chips inside head-mounted displays (like smart glasses) as well as image sensors used in camera and automotive applications.
How in-demand are Himax chips? When the company reported its third-quarter earnings results last week, it delivered all-time highs for revenue, gross margin and earnings-per-share. Over the past 12 months, HIMX stock has rewarded investors with 129% growth. With the company noting that long-term supply agreements have secured additional foundry capacity for its chips in 2022, the future is looking bright.
HIMX stock currently earns a “B” Total grade in Portfolio Grader.
Taiwan’s ChipMOS is a big part of the semiconductor industry, but it’s not a foundry and it’s not directly involved in custom chip development. Instead, ChipMOS is focused on semiconductor testing and packaging services. Being located in Taiwan means the company is in close proximity to some of the world’s larges semiconductor foundries.
In its third quarter earnings, which it reported on Nov. 8, ChipMOS saw revenue increase 26% YoY. Over the past 12 months, IMOS stock has posted growth of 55%. As foundry operators add capacity and ramp up production in 2022, ChipMOS stands to grow its business as well.
At the time of publication, the Portfolio Grader Total grade for IMOS stock was “B.”
Semiconductor Stocks to Buy: Meta Materials (MMAT)
Atlantic Canada is an unlikely place to find a company that’s on the cutting edge, but that’s where you’ll find Meta Materials’ HQ. Meta manufactures specialized functional materials and nanocomposites that are used in high-tech applications.
These advanced “meta-materials” use light and other energy sources to function beyond the capability of natural materials — for example, film that can transmit radio waves and photovoltaic cells that can trap light from any direction.
While not semiconductors, high-tech Meta Materials’ products are used by the same industries that are desperate for chips, including consumer electronics, aerospace, healthcare, automotive, energy and defense. An investment lets you take advantage of the demand in these industries without the risk of chip production shortfalls.
MMAT stock is up 774% over the past 12 months, but be aware that retail traders and Reddit’s r/wallstreetbets have been part of the story. So don’t expect that massive degree of growth to be the norm, and periods of volatility can be expected.
MMAT stock is top on this list of semiconductor stocks in terms of its Portfolio Grader Total grade, which was an “A” at time of publication.
ON Semiconductor (ON)
Unlike other companies on this list, Arizona-based ON Semiconductor is not a fabless chip designer. ON Semi actually operates its own foundries. It not only produces its own chips, including image sensors and system-on-chip (SoC) solutions, it also produces custom semiconductors for other companies.
The company is making big moves to take full advantage of the extraordinary demand for semiconductor foundries. This includes the purchase of GT Advanced Technologies (finalized on Nov. 1), ensuring a ready supply of SiC (silicon carbide) used in semiconductor production.
After a decade where it usually traded well below the $10 level, ON stock has joined other semiconductor stocks in posting big gains. Currently trading over $58, shares are up 108% over the past 12 months.
The current Portfolio Grader Total grade for ON stock is “B.”
Semiconductor Stocks to Buy: SiTime (SITM)
Finally on this list of semiconductor stocks to buy in time for the holiday tech rush is SiTime. This high-tech company specializes in MEMS (micro-electromechanical systems). MEMS timers are a critical component in just about everything electronic. SiTime has shipped over 2 billion of its MEMS timing devices worldwide. They are used in smartphones, smartwatches and fitness trackers, medical devices, wireless chargers, tablets and smart home devices.
If you buy a tech gift for someone this holiday season, it almost certainly is equipped with an MEMS chip. And there’s a good chance that MEMS chips is from SiTime. Over the past 12 months. SITM stock has delivered growth of 188%.
SITM stock currently earns a “B” Total Grade in Portfolio Grader.
On the date of publication, Louis Navellier had a long position in HIMX and SITM. Louis Navellier did not have (either directly or indirectly) any other positions in the securities mentioned in this article. 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.
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