In this article, we will take a look at the 10 semiconductor stocks billionaires are loading up on.
The advancement in the field of artificial intelligence (AI) and machine learning (ML) is expected to bring new opportunities for the semiconductor industry. According to Fortune Business Insights, the size of the global semiconductor industry is expected to rise from $573.4 billion in 2022 to $1,380.8 billion in 2029, reflecting a compound annual growth rate of 12.2%. The storage sub-industry in the semiconductor industry will experience the highest tailwinds in terms of top-line and bottom-line increase from the advancements in AI and ML. Meanwhile, the computing, memory, and networking solutions sub-industries will have a favourable outlook as well due to these developments.
According to research by McKinsey and Company, the semiconductor industry generates earnings before interest and taxes (EBIT) of $5 billion to $8 billion from the AI and ML industry. It must be noted that these numbers only reflect 10% of the full potential of EBIT that can be generated from these sub-industries. The New York-based management consulting firm expects the number to reach $35 billion to $40 billion annually in the next two to three years. Moving forward, the value is projected to increase further to a range of $85 billion to $95 billion annually four or more years into the future. This would be equivalent to nearly 17% of the expected 2023 annual revenue of $532 billion for the semiconductor industry, according to Gartner.
Outlook for Recovery and Future Growth
Presently, the semiconductor industry is experiencing weak demand from both consumers and businesses, driven by economic uncertainty. This has led to an oversupply of chips, resulting in an inventory buildup and a decline in average selling prices (ASPs). As a result, the industry is expected to witness an 11.2% year-over-year (YoY) decline in revenue in 2023. The memory sub-industry is expected to be the worst impacted by the weakness of the overall industry as it is anticipated to see its annual revenue decline by 35.5% in 2023 to a sum of $92.3 billion. Despite the current challenges, there is an expectation of a strong recovery in the semiconductor industry. It is expected that the industry will bounce back in 2024 with a remarkable 70% increase in revenue, indicating a significant turnaround. Some of the best semiconductor stocks in the industry include Advanced Micro Devices, Inc. (NASDAQ:AMD), NVIDIA Corporation (NASDAQ:NVDA), and Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM).
A survey by KPMG provides further support to the forecast of oversupply in the semiconductor industry. According to the survey, 24% of the executives believe that the semiconductor industry is already facing the issue of oversupply. Meanwhile, 31% of the respondents believe that the oversupply of chips will take place in 2023. Another 36% of executives believe that the oversupply will take place between 2024 and 2026. The remaining 9% believe that there will be no oversupply in the next four years as demand will be able to keep pace. The automotive, industrial, civil, and military aerospace industries are expected to be demand generators for the semiconductor industry. According to Gartner, the end market demand for semiconductors from the automotive industry is set to experience a YoY growth of 13.8% in 2023 to total revenue of $76.9 billion in 2023. Meanwhile, KPMG anticipates the automotive sector to generate annual revenue of around $200 billion for the semiconductor industry by the middle of the next decade and cross the $250 billion level by 2040.
Shifting Demand Patterns
In the future, experts believe that the demand for semiconductors will become less reliant on the PC, tablet, and smartphone end markets. Demand is expected to come from diverse and fragmented markets that would be less exposed to any change in consumer spending, like the PC, tablet, and smartphone end markets, and would be more driven by capital outlay by organizations. The diversification of demand is likely to benefit some of the best semiconductor stocks in the industry. To support and strengthen the semiconductor industry, significant initiatives have been introduced in both the United States and Europe. The introduction of the CHIPS Act in the US intends to direct investment of $280 billion toward the semiconductor industry in the next decade. Around $200 billion will be diverted toward research and development (R&D) and commercialization. Furthermore, the US government intends to give a tax credit of $24 billion under this program. On the other hand, Europe intends to enhance its competitiveness in the semiconductor industry by introducing the European Chips Act (ECA) to attract $45.8 billion (€43 billion) of public and private investment across the continent by 2030.
Photo by Umberto on Unsplash
Our Methodology
We used Insider Monkey’s exclusive database of billionaire hedge fund managers to shortlist the top 10 semiconductor stocks billionaires are loading up on. We have also included the dollar value of the billionaire holdings and the total number of hedge fund investors in these companies as of Q1 2023. The best semiconductor stocks have been ranked in ascending order of the number of billionaires holding a stake in them during the first quarter of the year.
10 Semiconductor Stocks Billionaires Are Loading Up On
10. Texas Instruments Incorporated (NASDAQ:TXN)
Number of Billionaire Investors: 12
Dollar Value of Billionaire Holdings: $994,690,386
Number of Hedge Fund Holders: 52
Texas Instruments Incorporated (NASDAQ:TXN) is a Dallas, Texas-based technology company founded in 1951 that designs and manufactures semiconductors and various integrated circuits.
During the COMPUTEX 2023 Taipei forum, Sameer Wasson, the VP and General Manager of the Processor business unit at Texas Instruments Incorporated (NASDAQ:TXN), highlighted three key trends in the semiconductor industry. These trends include the integration of sensing capabilities into semiconductor devices, the incorporation of edge AI into systems and the increasing importance of ease of use for customers. Considering these trends, Texas Instruments Incorporated (NASDAQ:TXN) is working on innovative solutions while lowering system costs. Click here to read the company’s earnings call transcript for Q1 2023.
9. NXP Semiconductors N.V. (NASDAQ:NXPI)
Number of Billionaire Investors: 13
Dollar Value of Billionaire Holdings: $668,366,935
Number of Hedge Fund Holders: 53
NXP Semiconductors N.V. (NASDAQ:NXPI) is an Eindhoven, Netherlands-based semiconductor manufacturer founded in 1953 as a part of Philips. The company became an independent entity in 2006.
In an update issued to investors on May 3, William Stein at Truist increased the price target on NXP Semiconductors N.V. (NASDAQ:NXPI) from $210 to $217 and reiterated a Buy rating on the stock following strong Q1 2023 results. The analyst noted that even though NXP Semiconductors N.V.’s (NASDAQ:NXPI) revenue growth has recently turned negative on an annual basis, the company is still performing better than expected and exceeding consensus estimates. The strong demand from the company’s automotive segment is countering the weak demand from the mobile and industrial end markets.
NXP Semiconductors N.V. (NASDAQ:NXPI) is considered one of the best semiconductor stocks by hedge funds. Of the 943 hedge funds in Insider Monkey’s database, 13 funds held a stake in NXP Semiconductors N.V. (NASDAQ:NXPI) as of Q1 2023.
8. Broadcom Inc. (NASDAQ:AVGO)
Number of Billionaire Investors: 13
Dollar Value of Billionaire Holdings: $1,350,687,170
Number of Hedge Fund Holders: 72
Broadcom Inc. (NASDAQ:AVGO) is a San Jose, California-based company founded in 1961 and has grown through various mergers and acquisitions over the years. As of Q1 2023, 13 billionaires held a stake worth over $1.3 billion in Broadcom Inc. (NASDAQ:AVGO).
In its Q2 2023 results, analysts anticipate the company to report quarterly revenue of $8.71 billion along with an adjusted EPS of $8.01. On May 26, Rick Schafer at Oppenheimer increased the price target on Broadcom Inc. (NASDAQ:AVGO) from $720 to $800 and maintained an Outperform rating on the stock. The analyst anticipates in-line earnings results for the period, with mobile and networking end markets leading the top line for the company. Broadcom Inc. (NASDAQ:AVGO) is one of the best semiconductor companies due to its strong business fundamentals.
Overall, 72 hedge funds held a stake in Broadcom Inc. (NASDAQ:AVGO) during Q1 2023.
7. Intel Corporation (NASDAQ:INTC)
Number of Billionaire Investors: 13
Dollar Value of Billionaire Holdings: $2,081,425,917
Number of Hedge Fund Holders: 68
Intel Corporation (NASDAQ:INTC) is a Santa Clara, California-based technology company specializing in the designing and manufacturing of semiconductor chips and related technologies. The company has secured seventh place on our list of the best semiconductor stocks billionaires are loading up on.
The company received a favourable update after NVIDIA Corporation (NASDAQ:NVDA) CEO Jensen Huang revealed the probability of switching the manufacturing of its graphic processing units (GPUs) to Intel Corporation’s (NASDAQ:INTC) Foundries in an update issued on May 30.
Citadel Investment Group raised its stake in Intel Corporation (NASDAQ:INTC) by over 300% during Q1 2023.
6. Micron Technology, Inc. (NASDAQ:MU)
Number of Billionaire Investors: 16
Dollar Value of Billionaire Holdings: $1,028,963,528
Number of Hedge Fund Holders: 73
Micron Technology, Inc. (NASDAQ:MU) is a Boise, Idaho-based company founded in 1978 that specializes in the design, development, and manufacture of memory and storage solutions. On May 26, BMO Capital increased the price target on Micron Technology, Inc. (NASDAQ:MU) from $67 to $80 and reiterated an Outperform rating on the stock. The analyst thinks that Micron Technology, Inc. (NASDAQ:MU) is in a strong position to experience long-term tailwinds of AI in the memory sub-industry due to the expected launch of high bandwidth memory (HBM) 3 later this year.
In addition to Micron Technology, Inc. (NASDAQ:MU), Advanced Micro Devices, Inc. (NASDAQ:AMD), NVIDIA Corporation (NASDAQ:NVDA), and Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) are also among the best semiconductor stocks billionaires are loading up on.
5. Marvell Technology, Inc. (NASDAQ:MRVL)
Number of Billionaire Investors: 17
Dollar Value of Billionaire Holdings: $322,781,760
Number of Hedge Fund Holders: 62
Marvell Technology, Inc. (NASDAQ:MRVL) is a Santa Clara, California-based semiconductor company founded in 1995 that designs and manufactures a wide range of integrated circuits and related products. On May 26, C. J. Muse at Evercore ISI increased the price target on Marvell Technology, Inc. (NASDAQ:MRVL) from $60 to $70 and maintained an Outperform rating on the shares. The analyst noted that the company reported a “modest beat” in Q1 2023 results.
Here’s what Baron Funds said about Marvell Technology, Inc. (NASDAQ:MRVL) in its Q1 2023 investor letter:
“We took advantage of weakness to purchase shares of Marvell Technology, Inc. (NASDAQ:MRVL), a leading supplier of infrastructure semiconductor solutions that enable the rapid and efficient movement of data throughout the broader data economy, from the data center core to the network edge. Through both organic development and acquisitions led by CEO Matt Murphy since he took over in 2016, Marvell has built a portfolio of market-leading products and IP across computing, networking, security, electro-optics, and storage. Consequently, the company is a critical partner for hyperscale cloud service provider, data center, enterprise networking, carrier infrastructure, consumer, and automotive/industrial end-market customers. Marvell is targeting 15% to 20% average revenue growth through the semiconductor cycle in the coming years, largely driven by secular trends and company-specific product innovations within the cloud, 5G, and automotive end markets. We believe Marvell can deliver on or exceed this target because, among other growth opportunities, its market-leading optical products are critical to delivering increasing data transmission speeds required by hyperscale customers in AI training and inference. At the same time, the company is simultaneously ramping up a custom silicon business working directly with hyperscale partners. Given the dislocation in the stock on near-term cyclical concerns, we believe we paid an attractive price for the long-term growth of this industry-leading company.”
4. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Billionaire Investors: 17
Dollar Value of Billionaire Holdings: $2,828,088,576
Number of Hedge Fund Holders: 102
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is a Hsinchu, Taiwan-based leading global semiconductor company founded in 1987. The company is known for its expertise in manufacturing advanced semiconductor chips and providing foundry services to fabless semiconductor companies.
During an annual meeting in Omaha, Nebraska, on May 6, the Chairman and CEO of Berkshire Hathaway Inc (NYSE:BRK-B) highlighted that Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is one of the “best-managed and important companies in the world.” The billionaire hedge fund manager believes that no other semiconductor company comes in close comparison to Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), making it one of the best semiconductor stocks.
Here’s what Wedgewood Partners said about Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its Q1 2023 investor letter:
“Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) contributed to performance as revenues grew +27% (in USD) from the year ago quarter. Despite this strength, the Company’s customers have seen near-term weakness in demand due to Covid-19 normalization as well as the launch timing of new products. However, the Company is well-positioned to continue a long-term growth trajectory because its leading-edge capacity is being absorbed by high-performance computing applications, particularly at nontraditional integrated circuit (IC) design houses, such as Apple, Alphabet and Amazon, which have become IC-design powerhouses over the past decade. Importantly, the Company’s aggressive investment in leading-edge equipment, tight development with fabless IC designers, and embrace of open development libraries, should continue to foster a superior competitive position and attractive long-term growth.”
3. Applied Materials, Inc. (NASDAQ:AMAT)
Number of Billionaire Investors: 19
Dollar Value of Billionaire Holdings: $804,976,537
Number of Hedge Fund Holders: 84
Applied Materials, Inc. (NASDAQ:AMAT) is a Santa Clara, California-based global leader in materials engineering solutions for the semiconductor industry.
On May 19, C. J. Muse at Evercore ISI increased the price target on Applied Materials, Inc. (NASDAQ:AMAT) from $125 to $135 and maintained an Outperform rating on the stock. The investment firm anticipates Applied Materials, Inc.’s (NASDAQ:AMAT) EPS to rise to $7.50 in 2024 as compared to the Street’s forecast of $6.87.
Here’s what Vulcan Value Partners said about Applied Materials, Inc. (NASDAQ:AMAT) in its Q1 2023 investor letter:
“Applied Materials, Inc. (NASDAQ:AMAT) was a material contributor during the quarter. Despite a difficult environment, equipment revenue increased double digits. The company’s growth was supported by a nearly $20 billion backlog and strength in their lagging edge portfolio, driven by growth in semiconductor content for automotive, communications, sensors, and Internet of Things (IoT) end markets. Applied Materials also announced the promising new Centura Sculpa patterning system. This equipment will allow its customers to reduce their reliance on expensive EUV “double patterning”, which we believe will allow Applied Materials to gain share of the overall wafer fab equipment market. While we expect 2023 will be a down year for semiconductor capital equipment, we expect Applied Materials to return to growth in 2024. Overall, we feel positive about the company’s long-term outlook.”
2. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Billionaire Investors: 19
Dollar Value of Billionaire Holdings: $1,663,103,326
Number of Hedge Fund Holders: 91
Advanced Micro Devices, Inc. (NASDAQ:AMD) is a Santa Clara, California-based semiconductor company founded in 1969. The company is known for designing and manufacturing a range of computer processors and related technologies.
In a note issued to investors on May 3 following the Q1 2023 results, Christian Schwab at Craig-Hallum upgraded Advanced Micro Devices, Inc. (NASDAQ:AMD) stock from a Hold to a Buy rating and increased the target price from $76 to $100. The analyst anticipates double-digit growth from the PC segment in 2024 and thinks that Advanced Micro Devices, Inc. (NASDAQ:AMD) can emerge as a big winner in the AI space.
Horizon Kinetics LLC shared its stance on Advanced Micro Devices, Inc. (NASDAQ:AMD) in its Q1 2023 investor letter. Here’s what the firm said:
“It is among what are considered to be the great technology companies, like Advanced Micro Devices, Inc. (NASDAQ:AMD) and Intel, that one is apt to see some of the greatest confusion between short-term financial results and share price movements, on the one hand, and long-term financial results. The former are exceedingly difficult to predict. Long term results are relatively easy to predict, because they are bound by the limiting realities of the business model. In the case of AMD, that is the business of being a large-scale semi-conductor manufacturer with a more dominant competitor that has a scale economy advantage.
Here’s what people see, remember and act upon. In the past several years, AMD has been the best performing major technology stock. It’s outperformed Apple, Amazon, Google, Meta (Facebook) and Nvidia…” (Click here to read the full text)
1. NVIDIA Corporation (NASDAQ:NVDA)
Number of Billionaire Investors: 22
Dollar Value of Billionaire Holdings: $4,560,858,701
Number of Hedge Fund Holders: 132
NVIDIA Corporation (NASDAQ:NVDA) is a Santa Clara, California-based global technology company that specializes in the designing and manufacturing of graphics processing units (GPUs), system-on-chips (SoCs), and other related technologies. The company is best known for its GPUs, which are used in a variety of applications such as gaming, professional visualization, artificial intelligence (AI), data centres, and autonomous vehicles. NVIDIA Corporation (NASDAQ:NVDA) has secured first place on our list of the best semiconductor stocks billionaires are loading up on.
The company achieved a $1 trillion market capitalization during trading on May 30. Only four other US companies, namely Apple Inc. (NASDAQ:AAPL), Alphabet Inc. (NASDAQ:GOOGL), Microsoft Corporation (NASDAQ:MSFT) and Amazon.com, Inc. (NASDAQ:AMZN), have a valuation of more than $1 trillion. NVIDIA Corporation (NASDAQ:NVDA) stock has seen a year-to-date (YTD) gain of over 175% as the company is betting on the AI revolution that is resulting in record sales for the corporation.
Here’s what Polen Capital said about NVIDIA Corporation (NASDAQ:NVDA) in its Q1 2023 investor letter:
“Not owning Apple and NVIDIA Corporation (NASDAQ:NVDA) detracted from our relative performance. With respect to Apple, we have not felt that the combination of growth available and the valuation made for one of our best ideas. Concerning NVIDIA, while there seems to be strong demand for data center chips, the valuation and lack of clarity around pace and magnitude of that growth has kept us at bay to date.”
Suggested Articles:
- 15 Most Undervalued Growth Stocks To Buy
- Top 10 Generative Artificial Intelligence Companies to Invest In
- 15 Best Blue Chip Stocks To Buy According to Hedge Funds
Disclosure: None. 10 Semiconductor Stocks Billionaires Are Loading Up On is posted on Insider Monkey.
