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Best Semiconductor Stocks: 8 Picks To Watch or Buy for 2022


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Semiconductor stocks are in an interesting place right now. While most of them have been down this year — just like almost everything else — they have an opportunity to recover.

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The recent passage of the CHIPS and Science Act is intended to stimulate semiconductor research, development and production in the US The country currently produces only about 10% of the world’s, but this law aims to increase that number and reduce reliance on chips imported from Asia. The bill provides $39 billion in manufacturing incentives, $13.2 billion for research and development, and $500 million for technology security and supply chain activities.

This bill, along with the pandemic-induced supply backlog that’s still being worked through, could represent a significant opportunity for semiconductor stocks. If you’re looking for the best semiconductor stock to buy, here are some to watch.

Micron Technology Inc.

Micron Technology Inc. (MU) has been producing memory and storage solutions for over 40 years. The company recently broke ground on a $15 billion manufacturing fab in Idaho, positioning it well to take advantage of the benefits provided by the CHIPS Act.

Micron is hovering near its 52-week low at $52.69 as of Sept. 15. This is down significantly from the beginning of the year, when it was trading at $95.75. According to Yahoo Finance, 31 analysts followed Micron in September and gave it an average recommendation rating of 2.1. Eight rated it a strong buy, 20 rated it a buy and three recommended selling. The average 12-month price target is $73.00.

GlobalFoundries Inc.

GlobalFoundries Inc. (GFS) provides semiconductors for smart mobile devices, personal computers, automotive applications, communications and data infrastructure, and home and industrial IoT, or Internet of Things. At the end of 2021, GlobalFoundries reached an agreement with AMD to provide AMD with about $2.1 billion of silicon wafers through 2025, Reuters reported.

GlobalFoundries has fallen just 12% this year to date, from $66.67 at the beginning of the year to $58.49 on Sept. 15. The analysts are pretty bullish on this stock; out of 15 who follow it, five rated it a strong buy, and eight rated it a buy in August. One suggested holding it and the other said it was underperforming. It’s expected to reach a price of $68.33 in 12 months, per average analyst estimates.

Broadcom Inc.

Broadcom (AVGO) designs and supplies semiconductor and infrastructure software solutions to data center, software, wireless, broadband, networking and industrial markets. In May, Broadcom announced it would acquire enterprise software company VMware (VMW) for $61 billion in cash and stock. After the acquisition closes, which is expected to happen in Broadcom’s fiscal year 2023, the Broadcom Software Group will be known as VMware.

Broadcom closed on Sept. 15 at $500.14, down from $663.32 at the beginning of the year. But the stock has a one-year target estimate of $656.38. Its forward dividend is $16.40, yielding 3.26%. Analysts are behind it, with 10 out of 29 rating it a strong buy, 17 rating it a buy, and just two calling it a hold.

Texas Instruments Inc.

Texas Instruments (TXN) is a long-time tech titan, having been founded in 1930. The company designs and manufactures analog and embedded semiconductors. Its customers include companies in the personal electronics, automotive, industrial and communications sectors.

TXN’s forward dividend is $4.60, yielding 2.78%. While most analysts — 17 out of 32 — recommend holding Texas Instruments, six rate it a strong buy and eight rate it a buy. One considers the stock to be underperforming. The average 12-month price target is $185.34.

Advanced Micro Devices Inc.

Advanced Micro Devices (AMD) develops technology for computing, graphics and visualization for individuals, businesses and scientific research institutions worldwide. AMD provides high-end processors for gaming computers, graphics-intensive applications and technical computing.

AMD is down nearly 50% this year, starting the year at $150.24 and closing on Sept. 15 at $76.66. Most analysts (15 out of 31) recommend holding AMD. Four rate it as underperforming and one recommends selling. But five rate it a strong buy and six rate it a buy. The average 12-month price target is $123.66.

Intel Corp.

For 50 years, Intel (INTC) has been powering the computers that have become essential to our daily lives. From processors to connectivity to memory and storage, Intel has been at the forefront. It’s widely considered the leading US semiconductor manufacturer. The company is now moving from a PC-centric business to a data-centric business in the hope of staying at the top of the heap.

Like other big semiconductor companies, Intel has taken a hit this year, with its semiconductor stock down nearly 50% from $53.21 at the beginning of the year to $28.84 on Sept. 15. The analysts aren’t behind Intel 100% — in fact, the average recommendation rating of 3.1 is just a bit above the midpoint. Forty-one analysts follow the stock; five say it’s a strong buy, 18 say it’s a buy, and 13 recommend holding it. Three say it’s underperforming and two recommend selling. The 12-month average price target is $38.43.

Qualcomm Inc.

Qualcomm Inc. (QCOM) bills itself as “the world’s leading wireless tech innovator,” and it has capitalized on the move toward mobile, the Internet of Things and artificial intelligence.

Qualcomm has weathered this year’s storm better than most — the stock is down just 33% since January, from $186.21 to $124.98 on Sept. 15. Analysts like it, and of the 38 who followed it in August, nine rated it a strong buy, 15 rated it a buy and 14 said to hold it. The 12-month average price target is $186.64.

iShares Semiconductor ETF

If you can’t decide which semiconductor stock to buy, consider an exchange-traded fund that tracks the returns of the semiconductor sector. The largest one is the iShares Semiconductor ETF (SOXX) with $6.32 billion in net assets. It seeks to match the performance of the ICE Semiconductor Index, before fees and expenses. Because it’s passively managed, it’s an inexpensive fund and may provide some protection from volatility compared to buying a single stock.

Takeaway

The semiconductor industry, like most of the technology sector, has been hit hard in this downturn. Conventional wisdom says that means it is due for a rally, but the timing is anyone’s guess. The CHIPS Act should provide a much-needed boost to the sector, but its effects will take some time to be felt. The overall outlook is likely positive, however, as semiconductors have become integrated into almost everything.

Data was compiled on Sept. 16, 2022, and is subject to change. Information on analyst ratings was sourced from Yahoo Finance.

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