10 Semiconductor Stocks To Watch During A Potential Tech Pullback

In this article, we will be taking a look at 10 semiconductor stocks to watch during a potential tech pullback.

Tech Rally Or Tech Pullback?

As the month of June draws to a close, the financial markets are beginning to get concerned about the tech rally that has been taking the S&P 500 by storm so far this year. Many professionals have begun stating that a tech pullback may be fast approaching, which is beginning to scare off investors with billions locked in tech stocks. On June 27, Alex Kantrowitz, Big Technology Founder, was invited on CNBC to share his thoughts on the future of tech stocks in the second half of 2023 in light of these concerns.

Kantrowitz noted that the valuations of several tech stocks, including NVIDIA Corporation (NASDAQ:NVDA), have been skyrocketing so far this year, even as interest rates also continue to rise. At the time of his interview, NVIDIA Corporation (NASDAQ:NVDA) was trading at $410.02. According to Kantrowitz, one way to view such rising valuations is to ask why nothing so far has managed to stop them from continuing their upwards progress. On the other hand, one can also consider the fact that most big tech companies are seeing significant multiple expansions in 2023. Kantrowitz commented that these bigger multiples signal that there is a chance of there being a tech pullback. Here are some of his comments from the interview:

“Fundamentally, you look at it, it makes you a little nervous. Then you also say ‘what’s the market done until now?’ It’s kept buying.”

Kantrowitz’s comments truly highlight how many investors are approaching the rising tensions within the tech sector amid concerns of a pullback. While experience and fundamentals may signal to them that a pullback may be on the horizon, most are unable to truly consider this possibility considering the market’s continuing optimism surrounding the tech sector. Later in the interview, Kantrowitz offers some insights into what has been helping the tech industry maintain its momentum until now. In his eyes, the narrative surrounding artificial intelligence (AI), particularly after the launch of ChatGPT, has been mostly carrying the tech stocks. He noted the following:

“We’ve seen this run-up in tech stocks and it’s largely been based on an AI narrative. The narrative that we start talking to computers, they start talking back to us, all of a sudden the narrative is that it’s gonna change the world. And it very well might. But what’s happened since the introduction of ChatGPT? There’s been a lot of cool consumer experiments, or prototypes. But have we seen the one or two market-changing, world-changing applications that’s made everything that you do different the same way that the iPhone did? Because that’s basically what the market is betting. We haven’t seen it.”

According to Kantrowitz, the above spells out danger for the tech industry. He believes that if the narrative surrounding AI changes from the market considering it as a “world-changing” technology to just considering it as a “cool” technology, this would be “bad news” for both the tech industry and the market at large.

How Tech Pullback Concerns Are Impacting Stocks In The Sector

Several stocks in the tech industry have begun feeling the market’s uncertainty in light of more discussions surrounding a potential pullback. On June 26, CNBC briefly showed how several semiconductor stocks, such as Advanced Micro Devices, Inc. (NASDAQ:AMD) and Intel Corporation (NASDAQ:INTC), had actually declined for the day in light of these concerns by 8% and 9%, respectively. These stocks are among the best semiconductor stocks in 2023, as we mentioned in one of our previous articles. However, the changing market dynamics are signaling that investors should begin monitoring them more closely at this time. Additionally, it may also be wise to look closely at undervalued semiconductor stocks and the fastest-growing semiconductor companies at this time.

At the same time, on June 27, CNBC’s TechCheck showed how pullback concerns have begun heating up AI deals, leading to more companies jumping into partnerships and acquisitions. Examples include the recent partnership between NVIDIA Corporation (NASDAQ:NVDA) and Snowflake Inc. (NYSE:SNOW) and the $1.3 billion acquisition of MosaicML by Databricks. It was also noted that while these deals are beginning to heat up, several tech stocks are beginning to lose their gains heading into the last week of June.

The discussion above implies that while the tech industry is continuing to hold on, there are many stocks within it that investors should begin inspecting more closely. It may also be a good idea to begin monitoring the performance of semiconductor stocks, which began falling on June 26, to ensure that tech investors are not taken by surprise if a pullback does come about. In light of the uncertainty in the market today, we have compiled a list of some semiconductor stocks to watch as the situation develops further.

Photo by Slejven Djurakovic on Unsplash

Our Methodology

To compile our list below, we selected semiconductor stocks that were popular among hedge funds during the first quarter of 2023 by using Insider Monkey’s hedge fund data for that quarter. We ranked these stocks based on their upside potential, the data for which we sourced from TipRanks. The stocks are ranked in order of the lowest to the highest upside potential as of June 27.

Semiconductor Stocks To Watch During A Potential Tech Pullback

10. Intel Corporation (NASDAQ:INTC)

Number of Hedge Fund Holders: 68

Upside Potential: -6.24%

Intel Corporation (NASDAQ:INTC) is a semiconductor company based in Santa Clara, California. The company designs, develops, manufactures, and sells computing and related products across the globe.

Cody Acree, an analyst at Benchmark, reiterated a Buy rating on Intel Corporation (NASDAQ:INTC) shares on June 22. The analyst also maintained a $39 price target on the stock.

There were 68 hedge funds long Intel Corporation (NASDAQ:INTC) in the first quarter, with a total stake value of $3.7 billion.

Citadel Investment Group was the most prominent shareholder in Intel Corporation (NASDAQ:INTC) at the end of the first quarter, holding 17.2 million shares in the company.

9. Broadcom Inc. (NASDAQ:AVGO)

Number of Hedge Fund Holders: 72

Upside Potential: 4.61%

Mizuho’s Vijay Rakesh reiterated a Buy rating on Broadcom Inc. (NASDAQ:AVGO) shares on June 22, alongside an $840 price target.

Our hedge fund information for the first quarter shows 72 funds long Broadcom Inc. (NASDAQ:AVGO). Their total stake value in the company was $3.5 billion.

Broadcom Inc. (NASDAQ:AVGO) is based in San Jose, California. This information technology company designs, develops, and supplies semiconductor devices with a focus on complex digital and mixed-signal complementary metal oxide semiconductor-based devices.

Broadcom Inc. (NASDAQ:AVGO), like NVIDIA Corporation (NASDAQ:NVDA), Advanced Micro Devices, Inc. (NASDAQ:AMD), and Intel Corporation (NASDAQ:INTC), is a semiconductor stock investors should keep an eye on over the next few months.

8. Skyworks Solutions, Inc. (NASDAQ:SWKS)

Number of Hedge Fund Holders: 34

Upside Potential: 7.70%

We saw 34 hedge funds long Skyworks Solutions, Inc. (NASDAQ:SWKS) in the first quarter, with a total stake value of $497 million.

Skyworks Solutions, Inc. (NASDAQ:SWKS) develops proprietary semiconductor products. The company operates in the US, China, South Korea, Taiwan, Europe, the Middle East, Africa, and the rest of Asia-Pacific. It is based in Irvine, California.

Vijay Rakesh at Mizuho holds a Buy rating on Skyworks Solutions, Inc. (NASDAQ:SWKS) shares as of June 22. The analyst also maintains a $125 price target on the stock.

Holding 642,288 shares in the company, AQR Capital Management was the largest shareholder in Skyworks Solutions, Inc. (NASDAQ:SWKS) at the end of the first quarter.

Vulcan Value Partners made the following comment about Skyworks Solutions, Inc. (NASDAQ:SWKS) in its first-quarter 2023 investor letter:

“Additionally, Skyworks Solutions, Inc. (NASDAQ:SWKS), Amazon, and TransDigm Group were all material contributors during the quarter. We have discussed these companies at length in prior letters. Skyworks Solutions has been successful at utilizing its advancement in cellular connectivity in other end markets such as the Internet of Things. All three of these companies are executing well, their theses are intact, and we are pleased to own them at a discount to our estimate of intrinsic value.”

7. Texas Instruments Incorporated (NASDAQ:TXN)

Number of Hedge Fund Holders: 52

Upside Potential: 10.42%

Susquehanna analyst Christopher Rolland holds a Positive rating on Texas Instruments Incorporated (NASDAQ:TXN) as of June 13. The analyst also maintains a price target of $205 on the shares.

Texas Instruments Incorporated (NASDAQ:TXN) was spotted in the portfolios of 52 hedge funds in the first quarter, with a total stake value of $2.9 billion.

Like other names on our list, Texas Instruments Incorporated (NASDAQ:TXN) designs, manufactures, and sells semiconductors in the US and internationally. The company primarily caters to electronics designers and manufacturers in these regions. It is based in Dallas, Texas.

Texas Instruments Incorporated (NASDAQ:TXN), like NVIDIA Corporation (NASDAQ:NVDA), Advanced Micro Devices, Inc. (NASDAQ:AMD), and Intel Corporation (NASDAQ:INTC), is a semiconductor stock with significant upside potential.

6. Micron Technology, Inc. (NASDAQ:MU)

Number of Hedge Fund Holders: 73

Upside Potential: 11.66%

Micron Technology, Inc. (NASDAQ:MU) is a developer and seller of memory and storage products across the globe. This semiconductor company is based in Boise, Idaho.

Micron Technology, Inc. (NASDAQ:MU) was found in the 13F holdings of 73 hedge funds in the first quarter. Their total stake value in the company was $2.7 billion.

As of June 22, Toshiya Hari, an analyst at Goldman Sachs, holds a Buy rating on Micron Technology, Inc. (NASDAQ:MU) shares. The analyst also raised the firm’s price target on the stock from $70 to $80.

Citadel Investment Group was the biggest shareholder in Micron Technology, Inc. (NASDAQ:MU) at the end of the first quarter, holding 6.9 million shares.

5. NVIDIA Corporation (NASDAQ:NVDA)

Number of Hedge Fund Holders: 132

Upside Potential: 13.29%

NVIDIA Corporation (NASDAQ:NVDA) is a leading semiconductor company based in Santa Clara, California.

Mizuho’s Vijay Rakesh maintains a Buy rating and a $400 price target on NVIDIA Corporation (NASDAQ:NVDA) as of June 22.

In the first quarter, 132 hedge funds were long NVIDIA Corporation (NASDAQ:NVDA). Their total stake value was $12.3 billion.

Here’s what The Ithaka Group said about NVIDIA Corporation (NASDAQ:NVDA) in its first-quarter 2023 investor letter:

“NVIDIA Corporation (NASDAQ:NVDA) is the market leader in visual computing through the production of high-performance graphics processing units (GPUs). The company targets four large and growing markets: Gaming, Professional Visualization, Data Center, and Automotive. NVIDIA’s products have the potential to lead and disrupt some of the most exciting areas of computing, including: data center acceleration, artifi cial intelligence, machine learning, and autonomous driving. The stock’s appreciation in the quarter was twofold. First, the stock benefi ted from tremendous excitement surrounding the release of more advanced chatbots, specifi cally ChatGPT, and the likelihood this would necessitate the purchase of a large number of Nvidia’s products far into the future. Second, Nvidia posted a clean beat and raise quarter in mid-February, with investors becoming increasingly convinced the company and its suppliers are adequately working through the build up in channel inventories, which is reducing overall fears of ongoing inventory write-offs.”

4. QUALCOMM, Incorporated (NASDAQ:QCOM)

Number of Hedge Fund Holders: 69

Upside Potential: 15.26%

As of June 22, Vijay Rakesh at Mizuho holds a Buy rating and a $140 price target on QUALCOMM, Incorporated (NASDAQ:QCOM).

QUALCOMM, Incorporated (NASDAQ:QCOM) is a semiconductor company that develops and commercializes foundational technologies for the wireless industry.

There were 69 hedge funds holding stakes in QUALCOMM, Incorporated (NASDAQ:QCOM) at the end of the first quarter, with a total stake value of $1.7 billion.

3. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)

Number of Hedge Fund Holders: 102

Upside Potential: 20.48%

In total, 102 hedge funds were long Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in the first quarter, with a total stake value of $8.9 billion.

Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) manufactures and sells integrated circuits and semiconductor devices in Taiwan, China, Europe, the Middle East, Africa, Japan, the US, and internationally.

On June 16, Mehdi Hosseini at Susquehanna raised the firm’s price target on Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) from $126 to $128. The analyst also holds a Positive rating on the stock.

Baron Funds made the following comment about Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its first-quarter 2023 investor letter:

“Semiconductor giant Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) contributed in the first quarter due to easing geopolitical concerns and expectations for end-demand recovery later in 2023. We retain conviction that Taiwan Semi’s technological leadership; pricing power; and exposure to secular growth markets, including high-performance computing, automotive, 5G, and IoT; will allow the company to sustain strong earnings growth over the next several years.”

2. Advanced Micro Devices, Inc. (NASDAQ:AMD)

Number of Hedge Fund Holders: 91

Upside Potential: 23.63%

Mizuho’s Vijay Rakesh holds a Buy rating and a $140 price target on Advanced Micro Devices, Inc. (NASDAQ:AMD) as of June 22.

We saw 91 hedge funds holding stakes in Advanced Micro Devices, Inc. (NASDAQ:AMD) during the first quarter. Their total stake value was $4.9 billion.

Advanced Micro Devices, Inc. (NASDAQ:AMD) is a global semiconductor company based in Santa Clara, California.

Horizon Kinetics LLC noted the following about Advanced Micro Devices, Inc. (NASDAQ:AMD) in its first-quarter 2023 investor letter:

“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. STMicroelectronics N.V. (NYSE:STM)

Number of Hedge Fund Holders: 24

Upside Potential: 32.70%

STMicroelectronics N.V. (NYSE:STM) develops semiconductor products for sale across the globe. It is based in Switzerland.

STMicroelectronics N.V. (NYSE:STM) was found in the portfolios of 24 hedge funds at the end of the first quarter, with a total stake value of $488 million.

Christopher Rolland at Susquehanna holds a Positive rating and a $54 price target on STMicroelectronics N.V. (NYSE:STM) as of June 13.

See also 10 Undervalued Semiconductor Stocks To Buy Now and 20 Largest Semiconductor Companies in the World.

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Disclosure: None. 10 Semiconductor Stocks To Watch During A Potential Tech Pullback is originally published on Insider Monkey.