In this piece, we will take a look at the 10 semiconductor stocks to watch amid the Russia-Ukraine war.
Due to the near-ubiquity of information technology products in the modern world, the semiconductor industry has risen to become one of the most valuable and crucial industries globally. This is due to the fact that semiconductors, commonly referred to as ‘chips’ are necessary for powering every tech gadget – from smartphones to wearables, to notebooks and even large scale datacenters that lie at the heart of modern-day corporate functioning.
Therefore, chip companies have risen to become some of the most valuable firms in the world, and analysts and commentators have even started to call chips the ‘next oil’ due to their criticality in sustaining modern civilization. Every major country in the world is dependent on this crucial resource, whether for public, private, or corporate use. So, companies such as Intel Corporation (NASDAQ:INTC), NVIDIA Corporation (NASDAQ:NVDA) and the Taiwan Semiconductor Manufacturing Company (NYSE:TSM) are among those who see their products shipped globally.
The ongoing crisis in the Eastern European nation of Ukraine is having global implications. This is due to the fact that sanctions levied by the United States government against the Russian Federation have expanded their scope to cover the entire country and ensure that the Russian military and government cannot use American-origin products or products developed or designed with American products for their function. Naturally, given the prevalence of semiconductors in today’s global age, these sanctions will have implications on the semiconductor sector as well.
However, while the sanctions spell out disaster for Russia, they might also end up helping the everyday consumer. The semiconductor sector is still in the midst of a shortage due to excessive demand in the wake of the ongoing pandemic, and users have had to wait for months to get their hands on the latest products. Sanctions on the Russian Federation, if they end up in the chip companies completely suspending their sales to the country, will open up more products available for sale in other countries. Additionally, even if the Russian people are not directly targeted by the sanctions, rapid depreciation of the Russian Ruble will make most products out of reach for a large segment of the market.
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Our Methodology
In order to pick out the top stocks that you need to watch out for during the ongoing crisis, we took a broad look at the semiconductor sector and then honed down to the top ten firms that can be affected by the fallout of the American sanctions against Russia. We then analyzed the companies through their earnings reports, investor letters, analyst coverage, and hedge fund sentiment determined via Insider Monkey’s survey of 924 firms for the fourth quarter of last year.
10 Semiconductor Stocks To Watch Amid Russia-Ukraine War
10. STMicroelectronics N.V. (NYSE:STM)
Number of Hedge Fund Holders: 15
STMicroelectronics N.V. (NYSE:STM) is a European company that offers several kinds of semiconductor products that cover a host of applications. These applications include automotive, industrial applications, touch screens, and sensors. STMicroelectronics N.V. (NYSE:STM) was one of the highest searched microcontroller manufacturers on the Russian platform efind.ru, with the platform revealing that nearly 30% of all searchers were for the company in the fourth quarter of 2018.
During its fourth fiscal quarter, STMicroelectronics N.V. (NYSE:STM) earned $3.5 billion in revenue and $0.82 in GAAP EPS, beating analyst estimates for both. Credit Suisse raised the company’s price target to EUR65 from EUR60 in February 2022. 15 of the 924 hedge funds provided by Insider Monkey in the fourth quarter of last year owned the company’s shares.
STMicroelectronics N.V. (NYSE:STM)’s largest investor is Jim Simons’ Renaissance Technologies which owns 1.5 million shares worth $75 million.
Saturna Capital mentioned STMicroelectronics N.V. (NYSE:STM) in its third quarter 2021 investor letter. Here is what the fund said:
“STMicroelectronics has a goal of becoming carbonneutral by 2027, and in 2020 reported that their greenhouse gas emissions were down 19% over the previous year. In 2020, STMicroelectronics was the only semiconductor company with targets approved by the Science Based Targets Initiative for limiting warming to 1.5 degrees Celsius, and their 2027 net-zero goal is recognized as one of the most ambitious in the industry. As greenwashing presents a growing concern within the ESG community, and as more and more funds engage in re-branding exercises that have little to do with pursuing sustainable investment practices among others, our definition of sustainability includes financial sustainability, most often demonstrated by intelligent capital allocation leading to solid cash flows that can sustain a business without resorting to excessive leverage.”
STMicroelectronics N.V. (NYSE:STM) is part of our list of the chip stocks to watch out for in the wake of the Ukraine war, alongside Intel Corporation (NASDAQ:INTC), NVIDIA Corporation (NASDAQ:NVDA) and the Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM).
9. United Microelectronics Corporation (NYSE:UMC)
Number of Hedge Fund Holders: 15
United Microelectronics Corporation (NYSE:UMC) is one of the world’s largest contract chip manufacturers. The company is Taiwan’s second largest chipmaking company, and it is known for its focus on mature manufacturing technologies that have a wide variety of applications and use cases.
As its fiscal Q4 came to an end in December 2021, United Microelectronics Corporation (NYSE:UMC) had brought in $2.14 billion in revenue and $0.24 in GAAP EPS, beating Wall Street analyst estimates for both. 15 of the 924 hedge funds analyzed by Insider Monkey in the fourth quarter of last year had owned a stake in the chipmaker. United Microelectronics Corporation (NYSE:UMC)’s price target was raised to NT$70 from NT$65 by Citi in July 2021.
United Microelectronics Corporation (NYSE:UMC)’s largest shareholder is Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital which owns 6.3 million shares worth $74 million.
8. NXP Semiconductors N.V. (NASDAQ:NXPI)
Number of Hedge Fund Holders: 46
NXP Semiconductors N.V. (NASDAQ:NXPI) is a European semiconductor company that offers a wide variety of products. These products are used in automotive, WiFi and Bluetooth devices, sensors, and other products that require an application processor to function.
NXP Semiconductors N.V. (NASDAQ:NXPI) raked in $3 billion in revenue and $2.24 in GAAP EPS during its fourth fiscal quarter, for a strong set of results that saw it beat analyst estimates on both counts. The company’s price target was raised to $275 from $265 by Cowen in February 2022, as the research firm cited recent performance as evidence of the chip company being able to surpass its self set growth goals. Insider Monkey’s survey covering 924 hedge funds in Q4 2021 revealed that 46 had owned the company’s shares.
NXP Semiconductors N.V. (NASDAQ:NXPI)’s largest investor is Ken Fisher’s Fisher Asset Management who owns 897,844 shares worth $204 million.
ClearBridge Investments mentioned NXP Semiconductors N.V. (NASDAQ:NXPI) in its Q3 2021 investor letter outlining that:
“Over the last year, we have sought to improve the up capture of the portfolio by expanding exposure to the select bucket of companies growing revenues and earnings at meaningfully above-average rates and targeting large total addressable markets. Newer names in the select bucket like NXP Semiconductors have been strong contributors to relative performance over this period. We believe that owning a broader group of IT and Internet companies with different drivers to the businesses helps manage some of the risk in this relatively more expensive subsector.”
7. Texas Instruments Incorporated (NASDAQ:TXN)
Number of Hedge Fund Holders: 57
Texas Instruments Incorporated (NASDAQ:TXN) is one of the oldest semiconductor firms in the world after being formed in the United States in 1930. The company offers several kinds of chip products, which are crucial for the functioning of both the computing and telecommunications industries. Its products, such as analog controllers enable power management in gadgets and other systems, while those such as digital signal processors are used for converting signals in several equipment types.
Texas Instruments Incorporated (NASDAQ:TXN) raked in $4.8 billion in revenue and $2.27 in GAAP EPS during its fourth fiscal quarter, beating analyst estimates on both counts. The company’s share price rating was set to Market Perform by Raymond James in February this year, with the firm citing worries for delayed capital expenditure. The company also provides direct support for Russian-speaking engineers from its European offices.
Texas Instruments Incorporated (NASDAQ:TXN)’s largest investor is Jean-Marie Eveillard’s First Eagle Investment Management which owns 3.3 million shares worth $625 million. Insider Monkey’s Q4 2021 survey of 924 hedge funds revealed that 57 had owned the company’s shares.
In its 3Q 2021 investor letter, Distillate Capital mentioned the company and stated that:
“The largest exited positions were Oracle, which outperformed significantly, and Texas Instruments and Honeywell, which were roughly flat versus the market in the quarter but were edged out for inclusion by other stocks that became even more attractively valued.”
6. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 70
Advanced Micro Devices, Inc. (NASDAQ:AMD) is one of the three companies in the world that have the license to design and sell chips based on the x86 microarchitecture. This microarchitecture is the most common in the world and is used by the bulk of the global computing industry. The company has grown in popularity of late as it has managed to snatch market share from its larger rival, Intel Corporation (NASDAQ:INTC).
As its fourth quarter came to an end, Advanced Micro Devices, Inc. (NASDAQ:AMD) managed to earn $4.83 billion in revenue and $0.92 in non-GAAP EPS, beating analyst estimates on both counts. The chip designer’s price target was upgraded to $150 by the firm Bernstein after ten years in February 2022, with Bernstein lamenting that it had missed out on Advanced Micro Devices, Inc. (NASDAQ:AMD) ‘s meteoric share price growth. 70 out of the 924 hedge funds polled by Insider Monkey in the fourth quarter of last year had owned a stake in the company.
Advanced Micro Devices, Inc. (NASDAQ:AMD)’s largest investor is Ken Fisher’s Fisher Asset Management which owns 19.9 million shares worth $2.8 billion.
Carillon Tower Advisers mentioned Advanced Micro Devices, Inc. (NASDAQ:AMD) in its Q4 2021 investor letter and shared that:
“Advanced Micro Devices (AMD) supplies semiconductor chips for central processing units (CPUs) and graphic processing units (GPUs). The firm has been gaining share against its primary competitor in the datacenter server CPU space, as this rival has been unable to match the design and manufacturing capabilities of AMD and its partners. Investors are also looking forward to the closing of the previously announced merger with a semiconductor manufacturer that is another one of the portfolio’s holdings. The merger will increase AMD’s capabilities in the Field Programmable Gate Array (FPGA) chip space, and the combined company should possess the potential to win additional market share in the datacenter chip market.”
Alongside NVIDIA Corporation (NASDAQ:NVDA), Intel Corporation (NASDAQ:INTC) and Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), Advanced Micro Devices, Inc. (NASDAQ:AMD) is another chip stock to be on the lookout for.
5. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders: 74
Intel Corporation (NASDAQ:INTC) is the world’s largest chipmaker and is known as the pioneer of the modern-day semiconductor. The company is known for primarily selling central processing units (CPUs) to both public and private sector customers alongside its largest market, the general public. It is also developing graphics processing units (GPU) to better compete with other firms in the consumer electronics segment.
Intel Corporation (NASDAQ:INTC) raked in $19.5 billion in revenue and $1.09 in non-GAAP EPS, beating analyst estimates on both counts. The company is currently in the midst of a massive capital spending run that is aimed at boosting its chip manufacturing capabilities. Raymond James upgraded Intel Corporation (NASDAQ:INTC)’s shares to Market Perform in February 2022, outlining that in order to profit from Intel’s expenditures, investors will have to face some pain but that the shares should not underperform in the near future. Out of the 924 hedge funds polled by Insider Monkey in Q4 2021, 74 had owned the company’s shares.
Intel Corporation (NASDAQ:INTC)’s largest investor according to Insider Monkey’s research is Seth Klarman’s Baupost Group which owns 18 million shares worth $928 million.
“2021 was a highly productive year for Intel‘s new CEO, Pat Gelsinger. Despite the stock’s tepid results, we see a compelling, underappreciated fundamental story. Intel’s “brain drain” – a key part of our thesis when we first sought to help the company confront its long-time underperformance – appears to be reversing. Since joining Intel, Mr. Gelsinger has not only brought back prominent Intel former employees but has also attracted talents from competitors such as AMD, Nvidia, Apple, and, most recently, Micron’s stellar Chief Financial Officer, David Zinsner.
We are encouraged by Intel’s aggressive investment plan, including a recently announced fabrication plant in Ohio and acquisition of Tower Semiconductors. We knew from the start that Intel’s turnaround would be complex and lengthy, and we have been pleased to see Mr. Gelsinger sacrifice near-term earnings for long-term growth.
Finally, after a series of blunders across its PC and Server product lines, Intel is finally receiving good reviews for one of its upcoming processors: Alder Lake. Tom’s Hardware, a preeminent hardware publication, called Alder Lake “a cataclysmic shift in Intel’s battle against AMD’s potent Ryzen 5000 chips.” While this is just one product across a broad lineup, and given it will take time to achieve leadership across them all, we are encouraged by these tangible signs of progress under Mr. Gelsinger’s leadership. With talent returning, an improving product suite, and a willingness to invest for growth, we believe Intel’s prospects have turned the corner. We expect that the company’s upcoming analyst day will be an ideal time for Mr. Gelsinger to articulate the progress he has made and begin to reset expectations for the company.”
4. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 75
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is the world’s largest contract chip manufacturer. It is a company that manufactures semiconductors for other firms based on their designs. The company has grown in prominence lately as it has been able to challenge U.S. chip giant Intel Corporation (NASDAQ:INTC) in manufacturing technologies.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) earned $15.74 billion in revenue and $1.15 in GAAP EPS in its fourth fiscal quarter, beating analyst estimates for EPS. Morgan Stanley upgraded the company’s shares to Overweight in February this year, outlining that the long term future is positive for the company despite worries of a looming correction in the chip industry. An Insider Monkey survey of 924 funds in the fourth quarter of last year revealed that 75 had owned the company’s shares.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)’s largest investor is Ken Fisher’s Fisher Asset Management according to Insider Monkey’s research. The firm owns 25.9 million shares that are worth $3 billion.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) was mentioned by L1 Capital in its third quarter 2021 investor letter. The firm stated that:
“Even though they are not majority State owned and we would expect many of China’s technology champions to continue to grow strongly, outcomes for shareholders may be unsatisfactory… The Fund has retained its investment in Taiwan Semiconductor Manufacturing Company (TSMC) which is well placed to maintain its global leadership in semiconductor manufacturing. Due to geopolitical risks, we limit the position size of TSMC in the Fund.”
3. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 76
QUALCOMM Incorporated (NASDAQ:QCOM) is one of the largest semiconductor designers in the world. The company’s chips power most of the world’s smartphones, and it also designs other semiconductors such as those for connected vehicles.
QUALCOMM Incorporated (NASDAQ:QCOM) earned $10.7 billion in revenue and $3.23 in non-GAAP EPS during its first fiscal quarter, surpassing Wall Street expectations on both metrics. Its price target was increased by $50 to $250 by Baird in February 2022, with the firm highlighting that inventory corrections should not impact the company and that it is successfully targeting the high-end segment. 76 of the 924 firms part of Insider Monkey’s Q4 2022 survey had holdings in the company.
QUALCOMM Incorporated (NASDAQ:QCOM)’s largest investor is Panayotis Takis Sparaggis’ Alkeon Capital Management who owns 5.3 million shares worth $970 million.
2. Micron Technology, Inc. (NASDAQ:MU)
Number of Hedge Fund Holders: 83
Micron Technology, Inc. (NASDAQ:MU) is another American firm that targets a segment of the global semiconductor market that is generally referred to as the memory sector. This sector deals with products that aid computational chips in their processing. The company’s products cover several markets such as those for personal computing, data center, networking, and smartphones.
As its first fiscal quarter came to an end, Micron Technology, Inc. (NASDAQ:MU) had earned $7.69 billion in revenue and $2.16 in non-GAAP EPS, beating analyst estimates for both. Wedbush set a $120 price target, up from the previous $100, for the company in February 2022, outlining that operational advantages provide strengths to the company over its peers. 83 of the 924 hedge funds surveyed by Insider Monkey in Q4 2021 had owned a stake in the company.
Paul Marshall And Ian Wace’s Marshall Wace LLP is Micron Technology, Inc. (NASDAQ:MU)’s largest investor. It has a stake of $507 million through owning 5.4 million shares.
Hazelton Capital Partners mentioned Micron Technology, Inc. (NASDAQ:MU) in its Q3 2021 investor letter, believing that:
“It’s hard to explain how shares of Micron Technology, manufacture of DRAM and NAND semiconductor chips, can fall during a global chip shortage. In most industries, focusing on demand can give you a clear insight into what lays ahead for a company. Today, the memory and storage chip industry is no different. However, in the past, companies focused on market share led to the reckless build out of chip fabrication plants (FABs), oversupply, falling average selling prices (ASPs) of memory and storage chips, lower margins, and declining cash flows. As the industry consolidated – there are now just 3 major producers of DRAM and 5 on the NAND side – rational behavior among the key players began to take hold as competitors began focusing more on R&D. Currently, chip pricing remains cyclical although less so than in the past and that cyclicality has a long-term upward bias. The ongoing transition to newer and more robust platforms (3D 176-layer NAND & 1-Alpha node DRAM) has provided the memory and storage chip industry with improved supply capacity under its current manufacturing footprint, ultimately pressuring ASPs. Over the past three years, as most of the large platform conversions have already taken place, being able to add more bits per wafer has reached a saturation point. With no major FAB build outs planned in the near-term by competitors Samsung or SK Hynix, constrained supply and flattening cost curves should lead to durable and upward sloping ASPs once the recent volatility from the chip shortage subsides.
Currently Micron Technology trades at just 8x 2022 estimate earnings. MU is expecting growth in both DRAM and NAND not just from the supply of more chips to data centers, artificial intelligence, the auto sector, and mobile devices, but also from greater demand for gigabyte capacity per unit within those segments. With a healthy balance sheet, improving return on invested capital, and expanding cash flows, not only should Micron benefit from improving future earnings but its multiple should also reflect the transition to a flattening cost curve.”
1. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 111
NVIDIA Corporation (NASDAQ:NVDA) is the largest semiconductor designer in the world in terms of market capitalization. The company is primarily responsible for designing and selling graphics processing units (GPUs) to a wide variety of corporate and other customers. It also sells its products to the general public, and was in the spotlight lately due to a failed bid to acquire British design house Arm Ltd.
During its fiscal fourth quarter, NVIDIA Corporation (NASDAQ:NVDA) managed to earn $7.6 billion in revenue and $1.32 in non-GAAP EPS, beating analyst estimates for both. In its ongoing quarter, NVIDIA will pay a massive termination fee to Arm Ltd. due to its failed acquisition bid. 111 out of the 924 hedge funds polled by Insider Monkey during Q4 2021 had owned a stake in the company. Mizuho raised NVIDIA Corporation (NASDAQ:NVDA)’s price target to $345 from $335 in February 2022, outlining that the company had provided solid guidance.
Ken Fisher’s Fisher Asset Management is NVIDIA Corporation (NASDAQ:NVDA)’s largest investor through a $1.9 billion stake via owning 5.1 million shares.
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Disclosure: None. 10 Semiconductor Stock to Watch Amid Russia-Ukraine War is originally published on Insider Monkey.
