Semiconductors have been Wall Street’s success story for the past two years. Much of the tech sector’s gains since the start of 2023 have been built on the AI-optimism-led semiconductor boom. Rising demand for electronics also makes them a profitable position for investors.
According to the Semiconductor Industry Association, global semiconductor sales are expected to reach $611.2 billion in 2024, up 16% year-on-year. In 2025, it will likely grow 12.5%. In addition to attracting investors, the chip industry has also freed up billions of dollars from the Biden administration to build factories in the United States.
The semiconductor boom has led to advances in communications, computers, healthcare, military systems, transportation, clean energy and countless other applications. Over the past week, the semiconductor industry is up 1.9%, with NVIDIA Corporation (NVDA Quick quoteNVDA – Free Report) up 0.8%. The industry is up 94% in the past year.
The benchmark iShares Semiconductor ETF (SOXX) has grown 35.8% through July 15, despite sector headwinds such as the Israeli-Palestinian conflict. The fundamentals of the global semiconductor market remain robust, and the chip market is expected to grow even further in the second half of 2024. Much of the gains over the past year and a half can be attributed to the meteoric rise of NVIDIA. However, there are other stocks in the sector that show promise. In particular, overlooked semiconductor stocks offer significant upside.
Our choices
We selected three semiconductor stocks. These stocks have a Zacks Rank #1 (Strong Buy) or #2 (Buy). The search was also limited to stocks with a VGM Score of A or B, where V stands for Value, G for Growth and M for Momentum. The score is a weighted combination of these three metrics and allows you to eliminate the negative aspects of a stock and pick winners. You can see The complete list of today’s Zacks #1 Rank stocks here
Taiwan Semiconductor Manufacturing Company Limited (TSM Quick QuoteTSM – Free Report) is the world’s largest contract chipmaker. They build chips designed by others. The company was recently valued at nearly $1 trillion.
TSM’s expected earnings growth rate for the current year is 18.9%. The Zacks Consensus Estimate for its current-year earnings has improved 1% over the past 60 days. The company carries a Zacks Rank #2 and a VGM Score of B.
Micron Technology, Inc. (MU Quick quoteI – Free Report) is another giant in the sector, valued at around $145 billion, and specializes in memory and storage chips.
MU’s expected earnings growth rate for the current year is 126.1%. The Zacks Consensus Estimate for its current-year earnings has improved 31.8% over the past 60 days. The company carries a Zacks Rank #2 and a VGM Score of B.
Cirrus Logic, Inc. (CRUS Quick quoteCROTCH – Free Report) is a semiconductor company developing energy-efficient, high-precision mixed-signal processing solutions in China, the United States, and globally.
CRUS’s expected earnings growth rate for the coming year is 13.7%. The Zacks Consensus Estimate for next year’s earnings has improved 3.3% over the past 60 days. The company carries a Zacks Rank #1 and a VGM Score of B.
