In this article, we discuss the 10 best performing semiconductor stocks of 2021.
Semiconductor companies have witnessed a dramatic increase in revenue this year as a chip shortage, due to supply chain pressures and surging demand, hits major industries like consumer electronics, auto manufacturing, and even the software universe, fueling an unprecedented hike in chip prices. The situation has forced United States President Joe Biden to incentivize chip manufacturing in the country in a bid to decrease American reliance on Chinese chipmakers. These chips are a critical component of the modern-day defense technologies as well.
According to a report by the Semiconductor Industry Association, a trade association based in Washington, more chips were shipped to customers in the third quarter of 2021 than in any other quarter since records started being kept. The body estimates that between June and September this year, global sales of semiconductors stood at close to $145 billion, up over 27% year-on-year and close to 7.4% quarter-over-quarter. In September alone, nearly $50 billion worth of chip sales were made.
With supply shortages unlikely to end in the coming months, even as demand rises, investors could ride this boom in the chip industry. Some of the top semiconductor stocks to buy now include NVIDIA Corporation (NASDAQ:NVDA), Advanced Micro Devices, Inc. (NASDAQ:AMD), and ASML Holding N.V. (NASDAQ:ASML), among others discussed in detail below.
Our Methodology
These were picked based on their year-to-date gains (as of November 29). Analyst ratings and business fundamentals of each company are also discussed to provide readers with some additional context for their investment choices. The hedge fund sentiment around each stock was calculated using the data of 867 hedge funds tracked by Insider Monkey.
Semiconductor Stocks that Doubled in 2021
10. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 67
Year-To-Date Gain: 9%
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) markets integrated circuits and semiconductors. The stock has rallied since reports indicated that Apple had selected the company for the manufacture of Apple-designed 5G modems in new iPhones.
Cowen analyst Krish Sankar recently initiated coverage of Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stock with a Market Perform rating and a price target of $120, noting that the demand for the products of the firm may be peaking.
At the end of the third quarter of 2021, 67 hedge funds in the database of Insider Monkey held stakes worth $9.5 billion in Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM), up from 64 in the preceding quarter worth $10 billion.
Just like NVIDIA Corporation (NASDAQ:NVDA), Advanced Micro Devices, Inc. (NASDAQ:AMD), and ASML Holding N.V. (NASDAQ:ASML), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is one of the stocks that institutional investors are buying.
In its Q1 2021 investor letter, Bonsai Partners, an asset management firm, highlighted a few stocks and Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) was one of them. Here is what the fund said:
“Taiwan Semiconductor is the world’s largest outsourced foundry of logic semiconductor chips. TSMC’s shares appreciated 8.9% during the quarter.
Similar to last quarter, the supply-demand imbalance in semiconductor chips continues to benefit TSMC. To fuel new technological advances and meet the current supply imbalance, we see significantly increased capital spending across the industry over the coming years.
TSMC has an extraordinary track record of return on these large investments despite their rapid historical cadence of expansion. I remain hopeful that the large capital expenditure plan they now have ($100 billion of investment over the next three years) will be money well spent and not lead to industry oversupply in the medium term. Hopefully, future returns on these investments will look as good as those of the past.”
9. Micron Technology (NASDAQ:MU)
Number of Hedge Fund Holders: 63
Year-To-Date Gain: 13%
Micron Technology (NASDAQ:MU) makes and sells memory and storage products. The company recently revealed that it had settled a long-standing dispute with United Microelectronics Corporation and reached an agreement under which the latter would pay the former an undisclosed amount, removing a regulatory cloud over both firms.
In late October, Micron Technology (NASDAQ:MU) had announced that it would be investing $150 billion into memory research and development, including US-based fabrication, and other chip-related projects over the next decade.
At the end of the third quarter of 2021, 63 hedge funds in the database of Insider Monkey held stakes worth $3.8 billion in Micron Technology (NASDAQ:MU).
In its Q1 2021 investor letter, Bonsai Partners, an asset management firm, highlighted a few stocks and Micron Technology (NASDAQ:MU) was one of them. Here is what the fund said:
“Micron is a manufacturer of memory semiconductor chips. Micron appreciated 17.3% during the quarter.
With the semiconductor cycle in full swing, sentiment continued to improve for major DRAM and NAND suppliers. Spot pricing for DRAM continues its upward march due to supply shocks across the industry and sustained demand levels that continue to outstrip supply.
As a result, Micron showed improving results for the fiscal first quarter, raised guidance intra-quarter for the fiscal second quarter, and offered strong guidance for the fiscal third quarter in both growth and margins.
While the cyclical nature of DRAM hasn’t changed, the cycles themselves continue to become more benign, leading to long-term economic improvement across these businesses. Micron is now continuously profitable, with industry players in a dramatically stronger position than even just five years ago.
The biggest negative surprise in the quarter came from Micron’s exit from its 3D XPoint hybrid memory business. The company also announced its decision to sell its accompanying Utah fab. Fortunately, this development does not alter the investment thesis much since 3D XPoint was an option ticket for future growth. While it’s unfortunate this product didn’t pan out, now is an excellent time to sell a fab, so perhaps it is a blessing in disguise?”
8. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 70
Year-To-Date Gain: 20%
QUALCOMM Incorporated (NASDAQ:QCOM) develops and sells foundational technologies for the wireless industry. The company has decided to separate the Snapdragon chipset from other chips made by the firm. Snapdragon chips are found in most high-end smartphones.
On November 17, investment advisory Mizuho maintained a Buy rating on QUALCOMM Incorporated (NASDAQ:QCOM) stock and raised the price target to $195 from $170, highlighting the strong 5G connectivity roadmap of the company with solid growth outlook.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in QUALCOMM Incorporated (NASDAQ:QCOM) with 3.8 million shares worth more than $502 million.
In its Q1 2021 investor letter, Alger, an asset management firm, highlighted a few stocks and QUALCOMM Incorporated (NASDAQ:QCOM) was one of them. Here is what the fund said:
“Long position Qualcomm Inc. were among the top detractors from performance. Qualcomm is a leading semiconductor company with strong positions in telecommunications end markets that position the company as a primary beneficiary of the innovative 5G network standard roll out. Qualcomm is acknowledged as having the best technology specs for 5G chip sets as evidenced by signing up all 75 major OEMs including Apple. Additionally, beyond handsets, Qualcomm has meaningful growth drivers, including the Internet of Things, automobiles, industrials and gaming that provide the company with potential for generating increased earnings.
While Qualcomm was a notable positive contributor to the portfolio’s absolute and relative returns in 2020, during the first quarter, the share price declined and the position detracted from performance. Market demand for chips has been strong; however, Qualcomm hasn’t been able to fully exploit the demand as it is capacity constrained. Expectations were high for Qualcomm and while the quarter generally exceeded consensus estimates and forward estimates did rise, the street was anticipating a stronger positive surprise. We believe the production capacity constraints should abate in the second half of this year.”
7. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 50
Year-To-Date Gain: 29%
Broadcom Inc. (NASDAQ:AVGO) markets semiconductor infrastructure software. The stock has soared in the past few weeks as regulatory bodies settled monopoly charges against the company and analysts upgraded the stock ahead of an investor day presentation.
Broadcom Inc. (NASDAQ:AVGO) smashed market estimates on earnings per share and revenue for the third fiscal quarter by $0.05 and $20 million respectively. It was also named as the Google Cloud customer of the year in October.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Broadcom Inc. (NASDAQ:AVGO) with 1.1 million shares worth more than $568 million.
In its Q2 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Broadcom Inc. (NASDAQ:AVGO) was one of them. Here is what the fund said:
“A good way to conceptualize how we think about portfolio construction is to picture a pyramid. At the bottom of the pyramid are the durable compounding growth companies that form the strong foundation, resilience and consistency for the Strategy. We think these companies should comprise just under half of portfolio assets and feature annual revenue growth rates ranging from two times GDP up to 20% as well as healthy free cash flow generation.
Broadcom has delivered similar long-term appreciation through a combination of organic growth, capital deployment into new and adjacent opportunities through merger and acquisition activity as well as returning capital to shareholders through buybacks and dividends.”
6. NXP Semiconductors N.V. (NASDAQ:NXPI)
Number of Hedge Fund Holders: 51
Year-To-Date Gain: 39%
NXP Semiconductors N.V. (NASDAQ:NXPI) develops and sells various semiconductor products. The company has a decent dividend history and recently declared a quarterly dividend of $0.5625 per share, in line with previous. The forward yield was 1.02%.
KeyBanc analyst John Vinh recently raised the price target on NXP Semiconductors N.V. (NASDAQ:NXPI) stock to $255 from $250 and kept an Overweight rating, forecasting long-term revenue growth of at least 10% for the company.
Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in NXP Semiconductors N.V. (NASDAQ:NXPI) with 929,591 shares worth more than $182 million.
Alongside NVIDIA Corporation (NASDAQ:NVDA), Advanced Micro Devices, Inc. (NASDAQ:AMD), and ASML Holding N.V. (NASDAQ:ASML), NXP Semiconductors N.V. (NASDAQ:NXPI) is one of the stocks attracting the attention of hedge funds.
In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and NXP Semiconductors N.V. (NASDAQ:NXPI) was one of them. Here is what the fund said:
“Within IT, we have also increased exposure to a cyclical semiconductor industry currently working through a severe supply shortage due to several years of capacity reductions, COVID-19 shutdowns and one-off production delays as well as demand resilience in areas like autos and smartphones. Two recent additions, specialty semiconductor maker (including) NXP Semiconductors, was among the portfolio’s leading contributors in the first quarter. NXP rose as auto production ramped up and electric vehicle sales continued to expand.”
5. ASML Holding N.V. (NASDAQ:ASML)
Number of Hedge Fund Holders: 41
Year-To-Date Gain: 64%
ASML Holding N.V. (NASDAQ:ASML) makes and sells advanced semiconductor equipment systems. Earlier this year, the company had secured a deal worth $4.3 billion with SK Hynix, the second-largest chipmaker in the world, to provide the latter with secure extreme ultraviolet scanners.
In September, ASML Holding N.V. (NASDAQ:ASML) had forecast that it would reach between €24 billion and €30 billion in revenue within the next three years with margins above 50% amid a profitable and innovative ecosystem in the electronics industry.
Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in ASML Holding N.V. (NASDAQ:ASML) with 4 million shares worth more than $3 billion.
In its Q2 2021 investor letter, Polen Capital, an asset management firm, highlighted a few stocks and ASML Holding N.V. (NASDAQ:ASML) was one of them. Here is what the fund said:
“Dutch technology company ASML is the world’s only supplier of photolithography systems to leading-edge semiconductor manufacturers. It is a gross simplification and a valid point to note that ASML’s technology enables the computing technology we use today. For years, ASML engineers bent the laws of physics and enabled Moore’s Law—which states that computer chips will become faster and cost less—to progress.
Incremental innovation gains mushroomed with the rollout of Extreme Ultraviolet (EUV) technology. We were impressed by management’s recent acknowledgment that demand for ASML’s lithography systems is exceeding their prior expectations. Recent announcements by management and major customers for ASML give us even more confidence in the sustainability of growth. We believe ASML could grow its earnings at a high-teens rate over the coming five years.”
4. Applied Materials, Inc. (NASDAQ:AMAT)
Number of Hedge Fund Holders: 68
Year-To-Date Gain: 73%
Applied Materials, Inc. (NASDAQ:AMAT) provides manufacturing and software services to the semiconductor industry. The company has a market cap of $129 billion and posted $23 billion in revenue in the last fiscal year.
On November 23, investment advisory Lynx reiterated a Buy rating on Applied Materials, Inc. (NASDAQ:AMAT) stock and raised the price target to $200 from $140. KC Rajkumar and Jahanara Nissar issued the ratings update.
Among the hedge funds being tracked by Insider Monkey, London-based investment firm Generation Investment Management is a leading shareholder in Applied Materials, Inc. (NASDAQ:AMAT) with 4.3 million shares worth more than $563 million.
3. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 65
Year-To-Date Gain: 74%
Advanced Micro Devices, Inc. (NASDAQ:AMD) is a California-based semiconductor firm. The stock has rallied in the past few weeks after tech giant Meta announced that it would use the Epyc chips made by AMD in Meta data centers.
Wedbush analyst Matt Bryson recently maintained an Outperform rating on Advanced Micro Devices, Inc. (NASDAQ:AMD) stock and raised the price target to $165 from $140, noting that the company was poised to gain market share in the coming months if it executed growth ideas.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Advanced Micro Devices, Inc. (NASDAQ:AMD) with 19 million shares worth more than $2 billion.
In its Q4 2020 investor letter, Artisan Partners Limited Partnership, an asset management firm, highlighted a few stocks and Advanced Micro Devices, Inc. (NASDAQ:AMD) was one of them. Here is what the fund said:
“We also exited our positions in Advanced Micro Devices. Our investment campaign in Advanced Micro Devices (AMD) began in the second half of 2018, and we have seen a new management team reinvigorate the company’s product portfolio of microprocessors for PCs and servers, graphics processors, and video game consoles. These new, higher-margin products have helped the company partially close its margin gap with peers and capture share from market leader Intel. While we believe there is meaningful runway for further share gains and margin expansion, AMD has appreciated far beyond our mid-cap market cap mandate, and we exited our position.”
2. Axcelis Technologies, Inc. (NASDAQ:ACLS)
Number of Hedge Fund Holders: 22
Year-To-Date Gain: 116%
Axcelis Technologies, Inc. (NASDAQ:ACLS) markets ion implantation and other processing equipment used for the fabrication of semiconductor chips. The company has increased collaborations internationally in the past year, sending high energy and high current systems to a leading chip foundry in China.
Axcelis Technologies, Inc. (NASDAQ:ACLS) posted earnings for the third quarter on November 3, reporting earnings per share of $0.81, beating estimates by $0.10. The revenue over the period was $176 million, up 60% year-on-year.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Rima Senvest Management is a leading shareholder in Axcelis Technologies, Inc. (NASDAQ:ACLS) with 1.8 million shares worth more than $88 million.
1. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 83
Year-To-Date Gain: 152%
NVIDIA Corporation (NASDAQ:NVDA) operates as a visual computing firm. The company recently smashed market expectations on earnings per share and revenue for the third quarter by $0.09 and $290 million respectively.
Raymond James analyst Chris Caso recently raised the price target on NVIDIA Corporation (NASDAQ:NVDA) stock to $365 from $225 and kept a Strong Buy rating on the shares, underlining that the data center demand for chips made by NVIDIA was accelerating.
At the end of the third quarter of 2021, 83 hedge funds in the database of Insider Monkey held stakes worth $10 billion in NVIDIA Corporation (NASDAQ:NVDA), down from 86 the preceding quarter worth $9 billion.
In its Q1 2021 investor letter, Vulcan Value Partners, an asset management firm, highlighted a few stocks and NVIDIA Corporation (NASDAQ:NVDA) was one of them. Here is what the fund said:
“NVIDIA Corp. is the dominant supplier of Graphics Processing Units (GPUs) worldwide. NVIDIA’s GPUs are at the intersection of a number of important computing trends including the movement to the Cloud, artificial intelligence, autonomous vehicles, edge computing, gaming, and more. We previously owned NVIDIA and sold it in the third quarter of 2020 as the price to value gap closed and our margin of safety was reduced. As with all our MVP companies, we continued to follow NVIDIA closely. Since that time, NVIDIA reported excellent results and its value has compounded rapidly. The technology selloff at the beginning of the year negatively affected the stock price while our estimate of NVIDIA’s value per share increased. This happy combination of events created a margin of safety and an opportunity to once again add NVIDIA to the portfolio.”
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Disclosure. None. 10 Best Performing Semiconductor Stocks of 2021 is originally published on Insider Monkey.
