In this article, we discuss the top 10 semiconductor stock picks of Goldman Sachs. If you want to see more stocks in this selection, check out Goldman Sachs Semiconductor Stocks: Top 5 Picks.
As per Washington-based Semiconductor Industry Association, global semiconductor sales dropped 3% in September compared to last year, and Korean chipmakers produced 3.5% less than a year earlier in September. The Korean economy, which is highly dependent on the semiconductor industry, experienced low demand given weakening currencies, high trade deficits, and tightening interest rates around the world.
Meanwhile, the Biden administration is trying to boost investments in US chipmaking, in order to compete with China and to manufacture components essential for national security. The US effort increased after the semiconductor industry faced massive shortages in late 2020 and 2021, which revealed how essential chips were in the digital economy, for the production of everything from cars to smartphones. The most recent effort to help establish the US semiconductor industry is the CHIPS Act, which lent $39 billion in government funding for the local semiconductor manufacturing plants, in addition to billions of dollars for research and development initiatives.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is planning to construct a second US plant next to a $12 billion complex it is already building, which will advance American efforts to support local chipmaking. To benefit from the ongoing semiconductor initiatives amid lower competition from Korean and Chinese manufacturers, some of the best semiconductor stocks to consider according to investment firm Goldman Sachs are Texas Instruments Incorporated (NASDAQ:TXN), NVIDIA Corporation (NASDAQ:NVDA), and Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM).
Our Methodology
We selected the top 10 semiconductor stocks from the Goldman Sachs portfolio as of the end of the second quarter of 2022 for this analysis. Insider Monkey’s database of 895 elite hedge funds tracked as of the end of the second quarter of 2022 was used to assess the hedge fund sentiment around the securities.
Goldman Sachs Semiconductor Stocks: Top Picks
10. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders: 65
Goldman Sachs’ Stake Value: $535,779,000
Intel Corporation (NASDAQ:INTC) is a California-based multinational technology corporation that operates in the semiconductors, computer hardware, autonomous cars, automation, and artificial intelligence sectors. Intel Corporation (NASDAQ:INTC) is one of the elite Goldman Sachs semiconductor stocks to monitor, with the firm holding 14.3 million shares worth nearly $536 million, representing 0.12% of the total securities.
On October 31, Citi analyst Christopher Danely maintained a Neutral rating on Intel Corporation (NASDAQ:INTC) but lowered the price target on the shares to $27 from $30. Intel Corporation (NASDAQ:INTC) posted mixed results and guided well below consensus due to the PC downturn, the analyst told investors. The company also disclosed a cost control plan, “which should help but doesn’t help the core problems of manufacturing and wasting money on growth markets that will never pan out,” added the analyst.
According to Insider Monkey’s data, 65 hedge funds were long Intel Corporation (NASDAQ:INTC) at the end of June 2022, compared to 76 funds in the last quarter. David Blood and Al Gore’s Generation Investment Management held the largest stake in the company, comprising 14.7 million shares worth $552.5 million.
Like Texas Instruments Incorporated (NASDAQ:TXN), NVIDIA Corporation (NASDAQ:NVDA), and Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), Intel Corporation (NASDAQ:INTC) is one of the favorite semiconductor picks of elite hedge funds.
Here is what Baron Funds specifically said about Intel Corporation (NASDAQ:INTC) in its Q2 2022 investor letter:
“Then, there is the case of Intel Corporation (NASDAQ:INTC). A blue-chip tech champion with a market capitalization of over $500 billion in early 2000, the stock was trading at a P/E multiple of 42. It was a fast-growing company whose stock price and multiple declined more or less in line with its peers. However, unlike Google, Intel’s net income has grown from $7.3 billion in 1999 to $19.9 billion in 2021, a compounded annual growth rate of just 4.7%. Its growth from the dot com era has not proven to be durable, and Intel has yet to trade at the price it attained in 1999.”
9. Marvell Technology, Inc. (NASDAQ:MRVL)
Number of Hedge Fund Holders: 63
Goldman Sachs’ Stake Value: $569,242,000
Marvell Technology, Inc. (NASDAQ:MRVL) is a Delaware-based company that designs, develops, and sells analog, mixed-signal, digital signal processing, embedded, and standalone integrated circuits. In Q2 2022, Goldman Sachs owned more than 13 million shares of Marvell Technology, Inc. (NASDAQ:MRVL) worth $569.2 million, representing 0.12% of the total portfolio.
On October 18, Deutsche Bank analyst Ross Seymore maintained a Buy recommendation on Marvell Technology, Inc. (NASDAQ:MRVL) but lowered the price target on the shares to $55 from $65. Fears of fundamental deterioration are “leading to very bearish investor positioning” into the Q3 results for semiconductors, the analyst told investors in a research note.
According to Insider Monkey’s second quarter database, 63 hedge funds were long Marvell Technology, Inc. (NASDAQ:MRVL), with combined stakes worth $1.6 billion, compared to 63 funds in the prior quarter worth $2.4 billion. Paul Marshall and Ian Wace’s Marshall Wace LLP is the biggest position holder in the company, with approximately 5 million shares worth $214 million.
Here is what Carillon Tower Advisers specifically said about Marvell Technology, Inc. (NASDAQ:MRVL) in its Q2 2022 investor letter:
“Marvell Technology, Inc. (NASDAQ:MRVL) provides infrastructure semiconductor solutions. Investors have recently become concerned about the semiconductor cycle and how demand for Marvell’s products will fare in a slowing economic environment. We remain confident that the company’s portfolio of products is extremely important in parts of the datacenter server market, which remains healthy and possesses long-term secular trends. The company also has secured strong contract wins in upcoming global 5G wireless infrastructure build-outs, which are generally insulated from macroeconomic pressures. With supply chain issues easing, we believe Marvell remains in a strong position to post continued robust growth.”
8. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 71
Goldman Sachs’ Stake Value: $663,132,000
QUALCOMM Incorporated (NASDAQ:QCOM) is a California-based company focused on the development and commercialization of foundational technologies for the wireless industry worldwide. QUALCOMM Incorporated (NASDAQ:QCOM) is one of the most prominent Goldman Sachs semiconductor stocks to invest in. The firm owned 5.19 million shares of QUALCOMM Incorporated (NASDAQ:QCOM) in Q2 2022, worth $663 million and representing 0.14% of the total portfolio.
On October 14, QUALCOMM Incorporated (NASDAQ:QCOM) declared a quarterly dividend of $0.75 per share, in line with previous. The dividend is distributable on December 15, to shareholders of record on December 1. The dividend yield on November 8 came in at 2.67%.
KeyBanc analyst John Vinh on November 3 reiterated an Overweight rating on QUALCOMM Incorporated (NASDAQ:QCOM) and lowered the firm’s price target on the stock to $150 from $170. The analyst noted that QUALCOMM Incorporated (NASDAQ:QCOM) reported in-line Q4 results and “shockingly bad” Q1 guidance.
According to Insider Monkey’s second quarter database, 71 hedge funds were bullish on QUALCOMM Incorporated (NASDAQ:QCOM), compared to 73 funds in the last quarter. Alkeon Capital Management is a prominent stakeholder of the company, with 4.2 million shares worth $541.15 million.
In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and QUALCOMM Incorporated (NASDAQ:QCOM) was one of them. Here is what the fund said:
“Market strength continued in the fourth quarter, with only the communication services sector down in the Russell 1000 Value Index. Portfolio returns benefited from the strong performance of semiconductor maker QUALCOMM Incorporated (NASDAQ:QCOM), which has executed exceptionally well in pursuing the transition to 5G, growing both content and share due to its leadership position in cellular technology. The chipmaker recently outlined a number of peripheral growth opportunities outside of mobile markets, including automotive (where it hopes to leverage its strong presence in the automotive infotainment space into advanced driver assistance systems), Internet of Things (including opportunities in the PC market, VR/AR market, and factory automation) and radio frequency (where mmWave adoption globally, including China, would drive substantial upside).”
7. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 66
Goldman Sachs’ Stake Value: $791,115,000
Broadcom Inc. (NASDAQ:AVGO) is headquartered in San Jose, California, and the company designs, develops, and supplies digital and analog semiconductor devices and related products worldwide. In the second quarter of 2022, Goldman Sachs owned 1.6 million shares of Broadcom Inc. (NASDAQ:AVGO) worth $791 million, representing 0.17% of the total securities.
On October 18, Deutsche Bank analyst Ross Seymore reiterated a Buy rating on Broadcom Inc. (NASDAQ:AVGO) but slashed the firm’s price target on the shares to $575 from $635. The analyst expects the Q3 earnings season to “yield more pervasive signs of weakness” and for the second consecutive quarter, he sees downside risk to 2023 estimates. As for the semiconductor stocks, the analyst is becoming “incrementally more constructive,” noting the decline in the sector and relative underperformance versus the S&P 500 “have clearly priced in significant rev/EPS estimate cuts” and left the group valuation 20% below its 5-year average.
According to Insider Monkey’s data, 66 hedge funds were bullish on Broadcom Inc. (NASDAQ:AVGO) at the end of Q2 2022, compared to 71 funds in the last quarter. Ken Fisher’s Fisher Asset Management owned the leading stake in the company, with 1.5 million shares worth $716.3 million.
Here is what Carillon Tower Advisers specifically said about Broadcom Inc. (NASDAQ:AVGO) in its Q2 2022 investor letter:
“Tech stocks, including Broadcom Inc. (NASDAQ:AVGO), were one of the hardest-hit sectors due to fears over a weakening macroeconomic environment. Broadcom, however, outperformed semiconductor peers as its end-market exposures provided relatively more defensive characteristics.”
6. KLA Corporation (NASDAQ:KLAC)
Number of Hedge Fund Holders: 43
Goldman Sachs’ Stake Value: $835,425,000
KLA Corporation (NASDAQ:KLAC) is a California-based company that designs, manufactures, and markets process control, process-enabling, and yield management solutions for the semiconductor and electronics industries worldwide. In the second quarter of 2022, Goldman Sachs owned 2.6 million shares of KLA Corporation (NASDAQ:KLAC) worth $835.4 million, representing 0.18% of the total holdings.
On November 3, KLA Corporation (NASDAQ:KLAC) declared a quarterly dividend of $1.30 per share, in line with previous. The dividend is payable on December 1, to shareholders of record on November 15. The dividend yield on November 8 came in at 1.52%.
Susquehanna analyst Mehdi Hosseini on October 27 raised the price target on KLA Corporation (NASDAQ:KLAC) to $355 from $350 and reiterated a Positive rating on the shares. The analyst said he finds the more conservative 2023 WFE view as constructive, though he argues that the full extent of Logic/Foundry weakness is not yet completely factored in.
According to Insider Monkey’s data, 43 hedge funds were long KLA Corporation (NASDAQ:KLAC) at the end of Q2 2022, compared to 52 funds in the last quarter. Brian Ashford-Russell and Tim Woolley’s Polar Capital is a significant position holder in the company, with 498,135 shares worth about $159 million.
In addition to Texas Instruments Incorporated (NASDAQ:TXN), NVIDIA Corporation (NASDAQ:NVDA), and Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), Goldman Sachs is backing KLA Corporation (NASDAQ:KLAC) in the semiconductor space.
Here is what Vltava Fund has to say about KLA Corporation (NASDAQ:KLAC) in its Q1 2022 investor letter:
“We then used the money freed up to, among other things, open three new positions. The stock price declines during the Russian invasion brought a lot of good prices to the market. Out of all the possibilities we considered, we picked the stock of KLA Corporation (KLAC).
KLA Corporation develops leading-edge equipment and services that enable innovation throughout the electronics industry. It specialises in process management and control in semiconductor manufacturing and the related nanoelectronics industries. During manufacturing processes, products must be inspected for defects and correct critical dimensions in order to identify and eliminate possible sources of problems. As customers continue to enforce Moore’s Law, smaller chips must meet more precise specifications, which in turn increases the need for advanced inspection and diagnostic tools. This is a key step within the entire manufacturing process and one in which the company has built a very strong, and in places dominant, global position. We have been watching and waiting for an opportunity to acquire this stock for some time already, and this year’s drop in its price finally prompted us to buy.”
Click to continue reading and see Goldman Sachs Semiconductor Stocks: Top 5 Picks.
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Disclosure: None. Goldman Sachs Semiconductor Stocks: Top 10 Picks is originally published on Insider Monkey.
