In this article, we discuss the 10 best semiconductor stocks to buy for 2022.
In early December, the Semiconductor Industry Association, a trade and lobbying group, revealed that global semiconductor sales had risen to more than $48 billion in October, an increase of 24% year-on-year. The World Semiconductor Trade Statistics, in a report released at the same time, forecast that the annual global sales of semiconductors were expected to grow by 8.8% in 2022 to exceed $600 billion in sales. The numbers indicate the importance of semiconductors to the global economy.
Semiconductors power nearly every technology in the world today, from electric vehicles to aircraft and even mobile devices. As the demand for tech has increased, due in part to the rapid digitization of businesses because of the pandemic, but also because of supply chain issues, semiconductor stocks have registered an incredible rally this year that is expected to last well into 2022. The difference can be judged by the fact that chip makers were growing at a rate of 6.8% in 2020, a number that jumped to over 25% this year.
Analysts expect supply chain issues to persist and the demand to rise even further in 2022. Investors who want to ride this chip boom should check out some of the top semiconductor stocks to buy for the new year that include NVIDIA Corporation (NASDAQ:NVDA), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), and Advanced Micro Devices, Inc. (NASDAQ:AMD), among others discussed in detail below.
Our Methodology
The companies that have the potential to grow in the coming year, based on the popularity and viability of the products or services they offer amid the macro economic environment, were selected for the list.
In order to provide readers with some context for their investment choices, the business fundamentals and analyst ratings for the stocks were also considered. Hedge fund sentiment was included as a classifier as well.
The hedge fund sentiment around each stock was calculated using the data of 867 hedge funds tracked by Insider Monkey.
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Best Semiconductor Stocks to Buy for 2022
10. ASML Holding N.V. (NASDAQ:ASML)
Number of Hedge Fund Holders: 41
ASML Holding N.V. (NASDAQ:ASML) makes and sells advanced semiconductor equipment systems. In late September, the company said that based on megatrends in the electronics industry, it expected to grow annual revenue to between €24 billion and €30 billion by 2025.
Piper Sandler analyst Weston Twigg recently initiated coverage of ASML Holding N.V. (NASDAQ:ASML) stock with an Overweight rating and a price target of EUR758, noting that the firm was expanding gross margins and heading into 2022 with “powerful tailwinds”.
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 4.1 million shares worth more than $3 billion.
Just like NVIDIA Corporation (NASDAQ:NVDA), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), and Advanced Micro Devices, Inc. (NASDAQ:AMD), ASML Holding N.V. (NASDAQ:ASML) is one of the stocks that elite investors are buying.
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.”
9. KLA Corporation (NASDAQ:KLAC)
Number of Hedge Fund Holders: 44
KLA Corporation (NASDAQ:KLAC) markets process control and yield management solutions for the semiconductor industry. It has registered year-on-year growth of more than 42% this year, topping chip equipment manufacturers, and looks set to continue on that trajectory in 2022.
Some of the products and services offered by KLA Corporation (NASDAQ:KLAC) to the chip industry include defect inspection and review systems, metrology solutions, process monitoring computational lithography software, and data analytics.
At the end of the third quarter of 2021, 44 hedge funds in the database of Insider Monkey held stakes worth $1.8 billion in KLA Corporation (NASDAQ:KLAC), compared to 45 in the previous quarter worth $1.3 billion.
8. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 50
Broadcom Inc. (NASDAQ:AVGO) supplies semiconductor infrastructure software solutions. On December 7, the company announced that it had agreed to a deal to purchase computer software firm AppNeta that specializes in network performance monitoring.
Broadcom Inc. (NASDAQ:AVGO) recently posted earnings for the fourth fiscal quarter, reporting earnings per share of $7.81, beating estimates by $0.04. The revenue over the period was $7.4 billion, up more than 14% year-on-year.
Among the hedge funds being tracked by Insider Monkey, New York-based investment firm Cantillon Capital Management is a leading shareholder in Broadcom Inc. (NASDAQ:AVGO) with 1 million shares worth more than $525 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.”
As the world saw a chip shortage, elite hedge funds closely watched and piled into semiconductor stocks like NVIDIA Corporation (NASDAQ:NVDA), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) and Advanced Micro Devices, Inc. (NASDAQ:AMD) in 2021.
7. NXP Semiconductors N.V. (NASDAQ:NXPI)
Number of Hedge Fund Holders: 51
NXP Semiconductors N.V. (NASDAQ:NXPI) makes and sells various products related to semiconductors. On November 10, the firm had revealed a collaboration with automaker Ford for the delivery of enhanced driver experiences and services across a global fleet of vehicles.
NXP Semiconductors N.V. (NASDAQ:NXPI) has an impressive dividend history and recently declared a quarterly dividend of $0.5625 per share, in line with previous. The forward yield was 1.02%. The company has a market cap of over $60 billion.
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.
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.”
6. Micron Technology (NASDAQ:MU)
Number of Hedge Fund Holders: 63
Micron Technology (NASDAQ:MU) makes and sells memory and storage products. Analysts expect memory and storage makers to be the standout performers within the chip industry in 2022. As the leading firm in this category, Micron could witness explosive growth.
UBS analyst Timothy Arcuri recently raised the price target on Micron Technology (NASDAQ:MU) stock to $99 from $90 and reiterated a Buy rating, backing the firm to continue on a growth trajectory with regards to earnings in 2022.
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), compared to 87 in the preceding quarter worth $6.3 billion.
In addition to NVIDIA Corporation (NASDAQ:NVDA), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), and Advanced Micro Devices, Inc. (NASDAQ:AMD), Micron Technology (NASDAQ:MU) is one of the stocks on the radar of hedge funds.
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?”
5. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 65
Advanced Micro Devices, Inc. (NASDAQ:AMD) operates as a semiconductor manufacturer. The stock has surged in the past few weeks amid reports that tech giant Meta will be using AMD chips, including the new Epyc chips, to power Meta data centers.
On November 9, Wedbush analyst Matt Bryson raised the price target on Advanced Micro Devices, Inc. (NASDAQ:AMD) stock to $165 from $140 and kept an Outperform rating, backing the firm to gain market share in the coming months.
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 19.6 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.”
4. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders: 66
Intel Corporation (NASDAQ:INTC) markets key technologies for smart devices. Media reports indicate that the company is planning to set up a chip making facility in Malaysia and will invest nearly $7 billion for the purpose.
Intel Corporation (NASDAQ:INTC) recently announced that it would be spinning off the self-driving unit of the company that is valued at over $50 billion, leading to a broader rally in chip stocks with Intel leading the way.
At the end of the third quarter of 2021, 66 hedge funds in the database of Insider Monkey held stakes worth $6.4 billion in Intel Corporation (NASDAQ:INTC), compared to 78 in the previous quarter worth $6.7 billion.
3. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 67
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) makes and sells integrated circuits and semiconductors. On December 10, the company revealed revenue and sales numbers for the month of November, reporting an 18.7% year-on-year increase in revenue and a 10.2% month-on-month increase in sales.
In early November, Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) announced that it had agreed to invest $7 billion into a chipmaking plant in Japan along with electronics giant Sony. The deal is subject to regulatory approval.
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.
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.”
2. Applied Materials, Inc. (NASDAQ:AMAT)
Number of Hedge Fund Holders: 68
Applied Materials, Inc. (NASDAQ:AMAT) provides equipment, services, and software for the semiconductor industry. Gary Dickerson, the CEO of the firm, recently said that supply chain issues related to the chip industry would get better soon.
Applied Materials, Inc. (NASDAQ:AMAT) has a decent dividend history and recently declared a quarterly dividend of $0.24 per share, in line with previous. The forward yield was 0.66%. The company has a market cap of $137 billion.
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.
1. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 83
NVIDIA Corporation (NASDAQ:NVDA) operates as a visual computing firm. The company is expected to lead a broader rally in chip stocks over the next year as demand rises in light of “metaverse” spending by tech giants.
Tigress Financial analyst Ivan Feinseth recently raised the price target on NVIDIA Corporation (NASDAQ:NVDA) stock to $400 from $230 and kept a Buy rating, noting the strength of the firm in the data center and gaming market as a key growth catalyst.
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), compared to 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.”
You can also take a peek at 10 Cheap Dividend Kings with Over 2% Yield and 12 Best Semiconductor Stocks To Invest In Right Now.
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Disclosure. None. 10 Best Semiconductor Stocks to Buy for 2022 is originally published on Insider Monkey.
