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Semiconductor Secrets: A Comprehensive Chipmaker Stock Guide
With Chipmakers soaring, this week we're unearthing the industry's best bets and future fortunes as we look to bolster your portfolio!
MCF Energy (TSXV: MCF) (OTCQX: MCFNF) (FRA: DC6) was established by a group of legendary energy entrepreneurs and explorers bringing capital and commitment to strengthening Europe’s energy security through domestic natural gas development. Key stakeholders of the company have previously created or led several billion-dollar energy ventures including in Europe. They are the leading technical, financial and operational minds to leverage this opportunity.
The company aims to offer energy security, but why is this such a key issue for Europe right now?
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Happy Monday, and welcome to another edition of Investing Intel from the team at ValueTheMarkets! As always, the newsletter is packed with stock picks and investing insights we think you’ll enjoy, including:
👉 Three stock tips
👉 Investing signals
👉 Fear & Greed analysis
👉 Key dates for your diary
👉 Investment strategy insights
This week, we’re talking chips. No, we don’t mean those delicious potato-based snacks. We’re talking about the high-tech variety, which is much less tasty but is far more cutting-edge. These chips, known as semiconductors by the egg-heads, are used in a vast variety of products:
Consumer electronics like smartphones, computers and game consoles.
Embedded within larger machines, such as central heating systems, engine management systems in vehicles and GPS systems.
Lighting and LED displays.
With technology sales on the rise and high-powered advances like AI set to test the mettle of the current crop of semiconductors, it’s no surprise that chipmakers are generating a lot of excitement right now.
That’s why Investing Intel is jumping in to guide you through the industry!
To kick things off, we’ve evaluated three semiconductor stocks which we like the look of…
The Big Hitter - NVIDIA (NASDAQ: NVDA)
NVIDIA has established itself as a global leader in the manufacturing and sale of Graphics Processing Units (GPUs), which are highly sought after in the continually expanding gaming industry. NVIDIA's powerful graphics cards have garnered a dedicated and substantial customer base.
The company's technology plays a vital role in the field of artificial intelligence (AI) and data centers, with its GPUs widely utilized for high-performance computing and machine learning applications. As the demand for AI technologies continues to surge, NVIDIA is well-positioned to benefit.
NVIDIA is actively involved in the development of autonomous vehicles through its Drive platform. With advanced computing capabilities, NVIDIA's GPUs are integral to powering the AI systems that enable self-driving cars.
The business has consistently demonstrated impressive financial performance, marked by significant revenue growth and earnings expansion.
NVIDIA has recently made headlines with its planned acquisition of prominent microprocessor design outfit Arm Holdings, which could open up new growth opportunities but is currently subject to regulatory scrutiny.
Sitting at the forefront of technological innovation, NVIDIA is continuously introducing new and improved products. The company's dedication to pushing the boundaries of graphics and computing technologies allows it to maintain a competitive edge.
The stock shows impressive momentum, with its price having leapt by more than 100% over the last 12 months.
The Diversifier - Monolithic Power Systems (NASDAQ: MPWR)
Monolithic Power Systems offers a broad range of efficient power solutions for industrial applications, telecommunication infrastructures, cloud computing, automotive and consumer applications.
The company is actively focused on expanding its customer base and entering new markets, including electric vehicles and renewable energy, which present significant growth opportunities.
The business has consistently achieved revenue growth, maintains robust profit margins, and boasts a strong balance sheet with minimal debt, ensuring financial stability.
Dedication to research and development means that Monolithic Power Systems has achieved continuous innovation, leading to the creation of high-performance products. These solutions are characterized by efficiency, smaller form factors, and cost-effectiveness, making them attractive to diverse customers.
Increasing demand for power-efficient systems and emerging technologies such as the Internet of Things (IoT), 5G, and autonomous vehicles means there is a favorable market environment for Monolithic Power Systems' power solutions.
The 5G Master - Qualcomm Incorporated (NASDAQ: QCOM)
Qualcomm has established itself as a leading player in the 5G revolution, leveraging its expertise in wireless communication technologies. As the global adoption of 5G continues to gain momentum, Qualcomm's extensive portfolio of 5G chipsets and technologies positions it for significant growth in chipset sales and licensing revenue.
The company boasts an extensive and valuable intellectual property (IP) portfolio in the wireless communications industry. This rich collection of patents offers the company enjoys a competitive advantage, as it can license its IP to other manufacturers and generate consistent royalty income.
While smartphones remain a significant market for Qualcomm, the company is strategically expanding its footprint into other segments, with diverse applications including automotive systems, Internet of Things (IoT) devices, data centers, and artificial intelligence (AI) applications.
Qualcomm has a strong track record of financial performance, characterized by solid profitability and a healthy balance sheet.
Recognizing the importance of collaboration and strategic alliances, Qualcomm actively seeks partnerships with industry players and makes targeted acquisitions. These initiatives help expand the company's technological capabilities, broaden its market reach, and strengthen its competitive position.
Qualcomm's commitment to research and development (R&D) fuels its culture of innovation. Through substantial R&D investments, the company continues to push the boundaries of wireless communication and semiconductor technologies.
Analysis from Deloitte says that the global semiconductor industry is expected to grow to $1 trillion in revenues by 2030, representing a doubling within the space of a decade. However, the analysis added that one of the key issues facing the industry is the diversification of supply chains after supply chain issues that emerged in 2021 threw the issue into sharp relief.
Deloitte’s report stated:
“Replicating the capabilities of Asian manufacturing locations won’t be easy. Until the supply chain, pandemic, and trade issues surfaced, Asia had secured supply of raw and manufactured materials to make hundreds of components. Replicating and building that model in multiple geographically unconcentrated new locations would likely take years or even decades. Nonetheless, starting in 2023, the chip companies need to plan and prepare for potential risks involved in diversification.”
Despite this major challenge, chipmakers appear optimistic about their near-term prospects due to several key drivers. KPMG and the Global Semiconductor Alliance (GSA) conducted a survey of semiconductor executives in the fourth quarter of 2022, which saw 81% of respondents projecting that their company’s revenue would grow over the coming year.
Meanwhile, automotive demand was seen as driving revenues higher, with wireless communications and IoT being the second and third most significant catalysts for growth.
But with the emergence of huge leaps forward in AI technology over the months since this survey took place in late 2022, these executives might offer different answers now. These new developments mean the heat is on for companies to be able to produce chips advanced enough to handle the vast computing power required by AI technology.
Demand for less powerful chips for consumer electronics is likely to continue, but chipmakers vowing to be at the forefront of the AI revolution face having to juggle the production of cutting-edge products with solving the supply chain vulnerabilities which have caused them so much chaos in recent years.
The top trending stocks on Reddit over the last week are:
Artificial intelligence innovator C3.ai found itself generating chatter due to a double-digit decline in share price amid a lawsuit from investors. The lawsuit alleges that the business made misleading statements regarding its relationship with oilfield services provider Baker Hughes (NYSE: BKR).
Chipmakers NVIDIA and AMD featured on the list amid continued excitement about how AI advancements could lead to favourable conditions. News reports from the last week suggest that chipmakers are increasingly looking towards Japan for tech partnerships and development programmes as deteriorating relations with China take their toll.
Apple shares climbed to record highs last week as investors became excited about the upcoming reveal of the company’s new virtual reality headset technology. Finally, EV giant Tesla rounded off the top five as its share price climbed by almost 10% on the back of general sector strength and solid sales in China.
Fear & Greed
The Fear and Greed Index is a measure of stock market sentiment calculated by CNN Business using seven measures, including market momentum, market volatility, and safe haven demand. It’s meant to shed light on the emotions currently driving the market, giving you insight into how traders are making decisions. Remember, traders are humans, not robots.
This week’s reading shows a decline in greed after the market saw a slight decline in average share prices, while junk bond demand rocketed even as the Financial Times reported that analysts were “puzzled” at the junk bond market’s current level of resilience.
Dates in the Diary
Monday 5th – US PMI Data (May) / US Factory Orders Data (Apr) / Eurozone PPI Data (Apr)
Tuesday 6th – Eurozone Retail Sales Data (Apr)
Wednesday 7th – US Balance of Trade Data (Apr) / China Balance of Trade Data (May) / Canada Balance of Trade Data (Apr)
Thursday 8th – US Wholesale Inventories (Apr) / Eurozone GDP Data (Q1) / Eurozone Employment Data (Q1)
Friday 9th – China Inflation Data (May) / Canada Employment Data (May)
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Investing Strategy Ideas: GARP Investing
GARP stands for a lot of different things.
Global Antibiotic Resistance Partnership. Global Association of Risk Professionals. Generic Attribute Registration Protocol.
Thrilling as this trio undoubtedly is, we’re not talking about any of them. Instead, GARP investing refers to Growth at a Reasonable Price, which is a strategy that targets companies achieving consistent impressive growth with a low market cap.
The strategy is in some ways a hybrid of growth and value investing, but aims to avoid the premium valuations typical of stocks targeted by the former as investors seek to steer clear of overpaying for growth.
S&P even tracks the performance of GARP companies through its S&P 500 GARP Index, which it defines as following companies with consistent fundamental growth, reasonable valuation, solid financial strength, and strong earning power.
If you’re interested in backing this, an easy way to do so is through the Invesco S&P 500 GARP ETF. If you’re more interested in individual equities, GARP companies include:
KLA Corp (NASDAQ: KLAC)
Qorvo Inc (NASDAQ: QRVO)
Hologic Inc (NASDAQ: HOLX)
Applied Materials Inc (NASDAQ: AMAT)
NRG Energy Inc (NYSE: NRG)
Until Next Time!
Many thanks for taking the time to read Investing Intel today. We hope you’ve enjoyed our insights and are looking forward to more in the week ahead.
Have a good week!
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