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Semiconductor Sales Gain Momentum: 3 Growth Stocks to Buy Now
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The semiconductor industry is regaining strength, as reflected by increasing global sales. The Semiconductor Industry Association recently reported a 4.1% month-over-month increase and 19.1% year-over-year growth in global semiconductor sales, reaching $49.1 billion in May.
The year-over-year sales percentage growth in May was the largest since April 2022, infusing renewed confidence among investors. Year-over-year growth was strongest in the Americas, with sales jumping 43.6%, trailed by China and Asia Pacific/All Other, sales of which increased 24.2% and 13.8%, respectively.
Semiconductor Sales: 2024 Forecasts Positive
Forecasts for 2024 paint an optimistic picture, expecting sustained demand to propel sales growth.
The World Semiconductor Trade Statistics (WSTS) projects an impressive 16% increase over 2023, up from the previous guidance of 13.1%. Global sales for 2024 are anticipated to reach $611.2 billion. Americas sales are expected to lead, with sales likely to surge more than 25% this year.
IDC’s expectations for 2024 semiconductor sales are more optimistic. The market research firm expects more than 20% year-over-year growth, primarily fueled by heightened demand for artificial intelligence (AI) chips and recovery in smartphone demand.
For 2025, WSTS global sales are expected to grow 12.5%, ultimately reaching $687.4 billion.
Semiconductor’s Long-Term Prospects Bright
The semiconductor industry is well-poised to benefit from the growing proliferation of AI and machine learning. Spending on AI systems is expected to accelerate in 2024 and 2025 as organizations continue to leverage AI as part of their digital transformation efforts. The advent of Generative AI (GenAI) has further attracted investments.
Gartner estimates spending on AI software to witness a CAGR of 19.1% between 2022 and 2027 to hit $297 billion in 2027. GenAI software spending is expected to surge from 8% in 2023 to 35% by 2027. Deloitte expects enterprise spending on GenAI to increase 30% in 2024 from $16 billion in 2023.
The accelerated deployment of 5G technology — the next-generation wireless revolution — is likely to propel further growth. Apart from this, the Internet of Things (IoT), autonomous vehicles, augmented reality/virtual reality and wearables are notable growth prospects.
Our Picks
Here, we have picked three semiconductor stocks — NVIDIA (NVDA - Free Report) , Lam Research (LRCX - Free Report) , and Micron (MU - Free Report) — that are well-poised to grow, driven by increasing demand for semiconductor content across a variety of domains, including data centers and electric vehicles.
Per the Zacks proprietary methodology, stocks with this favorable combination offer good investment opportunities.
YTD Performance
Image Source: Zacks Investment Research
NVIDIA currently sports a Zacks Rank #1 and has a Growth Score of A. Shares have returned a whopping 154.1% year to date.
NVIDIA is dominating the market for AI chips. Its GPUs are already being applied in AI models. This is expanding NVDA’s footprint in untapped markets like automotive, healthcare and manufacturing. Moreover, NVIDIA is benefiting from growing investments in generative AI.
NVIDIA’s strategy to release new AI chip models annually instead of its previous two-year update timeline is expected to strengthen its competitive strength.
The Zacks Consensus Estimate for fiscal 2025 earnings has been revised upward by 12.1% to $2.68 per share over the past 30 days, indicating a 106.15% increase from fiscal 2024.
NVDA Estimate Revision
Image Source: Zacks Investment Research
Lam Research is benefiting from strength across 3D DRAM and advanced packaging technologies. Growing etch and deposition intensity, owing to increasing technology inflections in 3D architectures, is a positive.
Lam, with its robust etch and deposition product lines like SABRE, Striker, ALTUS, VECTOR, Syndion and Vantex, remains well-poised to capitalize on the growing demand for memory-centric components in cutting-edge products such as smartphones, wearables and electronic gadgets.
The modest recovery in memory bodes well for LRCX. NAND is expected to benefit from technology upgrades, while DRAM is likely to benefit from node conversions and capacity additions in high bandwidth memory.
Lam Research currently carries a Zacks Rank #2 and a Growth Score of A. The consensus mark for fiscal 2025 earnings has increased 0.8% over the past 60 days to $35.29 per share. The stock has risen 38.9% year to date.
LRCX Estimate Revision
Image Source: Zacks Investment Research
Micron currently carries a Zacks Rank #2 and a Growth Score of B. Shares have returned 54.2% year to date.
MU is benefiting from improved market conditions, including inventory improvement in the data center, as well as stabilization in other markets, such as automotive, industrial and others.
Micron anticipates the pricing of DRAM and NAND chips to increase next year, thereby improving its revenues. The pricing benefits should primarily be driven by the rising number of AI-powered servers, causing a scarcity in the availability of cutting-edge DRAM and NAND supply. Also, 5G adoption in the IoT devices and wireless infrastructure is likely to spur demand for memory and storage.
The Zacks Consensus Estimate for fiscal 2024 earnings has increased 31.8% over the past 60 days to $1.16 per share, suggesting massive 126.07% year-over-year growth.
MU Estimate Revision
Image Source: Zacks Investment Research
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Semiconductor Sales Gain Momentum: 3 Growth Stocks to Buy Now
The semiconductor industry is regaining strength, as reflected by increasing global sales. The Semiconductor Industry Association recently reported a 4.1% month-over-month increase and 19.1% year-over-year growth in global semiconductor sales, reaching $49.1 billion in May.
The year-over-year sales percentage growth in May was the largest since April 2022, infusing renewed confidence among investors. Year-over-year growth was strongest in the Americas, with sales jumping 43.6%, trailed by China and Asia Pacific/All Other, sales of which increased 24.2% and 13.8%, respectively.
Semiconductor Sales: 2024 Forecasts Positive
Forecasts for 2024 paint an optimistic picture, expecting sustained demand to propel sales growth.
The World Semiconductor Trade Statistics (WSTS) projects an impressive 16% increase over 2023, up from the previous guidance of 13.1%. Global sales for 2024 are anticipated to reach $611.2 billion. Americas sales are expected to lead, with sales likely to surge more than 25% this year.
IDC’s expectations for 2024 semiconductor sales are more optimistic. The market research firm expects more than 20% year-over-year growth, primarily fueled by heightened demand for artificial intelligence (AI) chips and recovery in smartphone demand.
For 2025, WSTS global sales are expected to grow 12.5%, ultimately reaching $687.4 billion.
Semiconductor’s Long-Term Prospects Bright
The semiconductor industry is well-poised to benefit from the growing proliferation of AI and machine learning. Spending on AI systems is expected to accelerate in 2024 and 2025 as organizations continue to leverage AI as part of their digital transformation efforts. The advent of Generative AI (GenAI) has further attracted investments.
Gartner estimates spending on AI software to witness a CAGR of 19.1% between 2022 and 2027 to hit $297 billion in 2027. GenAI software spending is expected to surge from 8% in 2023 to 35% by 2027. Deloitte expects enterprise spending on GenAI to increase 30% in 2024 from $16 billion in 2023.
The accelerated deployment of 5G technology — the next-generation wireless revolution — is likely to propel further growth. Apart from this, the Internet of Things (IoT), autonomous vehicles, augmented reality/virtual reality and wearables are notable growth prospects.
Our Picks
Here, we have picked three semiconductor stocks — NVIDIA (NVDA - Free Report) , Lam Research (LRCX - Free Report) , and Micron (MU - Free Report) — that are well-poised to grow, driven by increasing demand for semiconductor content across a variety of domains, including data centers and electric vehicles.
These stocks have a favorable combination of a Growth Score of A or B and a Zacks Rank of #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Per the Zacks proprietary methodology, stocks with this favorable combination offer good investment opportunities.
YTD Performance
NVIDIA currently sports a Zacks Rank #1 and has a Growth Score of A. Shares have returned a whopping 154.1% year to date.
NVIDIA is dominating the market for AI chips. Its GPUs are already being applied in AI models. This is expanding NVDA’s footprint in untapped markets like automotive, healthcare and manufacturing. Moreover, NVIDIA is benefiting from growing investments in generative AI.
NVIDIA’s strategy to release new AI chip models annually instead of its previous two-year update timeline is expected to strengthen its competitive strength.
The Zacks Consensus Estimate for fiscal 2025 earnings has been revised upward by 12.1% to $2.68 per share over the past 30 days, indicating a 106.15% increase from fiscal 2024.
NVDA Estimate Revision
Lam Research is benefiting from strength across 3D DRAM and advanced packaging technologies. Growing etch and deposition intensity, owing to increasing technology inflections in 3D architectures, is a positive.
Lam, with its robust etch and deposition product lines like SABRE, Striker, ALTUS, VECTOR, Syndion and Vantex, remains well-poised to capitalize on the growing demand for memory-centric components in cutting-edge products such as smartphones, wearables and electronic gadgets.
The modest recovery in memory bodes well for LRCX. NAND is expected to benefit from technology upgrades, while DRAM is likely to benefit from node conversions and capacity additions in high bandwidth memory.
Lam Research currently carries a Zacks Rank #2 and a Growth Score of A. The consensus mark for fiscal 2025 earnings has increased 0.8% over the past 60 days to $35.29 per share. The stock has risen 38.9% year to date.
LRCX Estimate Revision
Micron currently carries a Zacks Rank #2 and a Growth Score of B. Shares have returned 54.2% year to date.
MU is benefiting from improved market conditions, including inventory improvement in the data center, as well as stabilization in other markets, such as automotive, industrial and others.
Micron anticipates the pricing of DRAM and NAND chips to increase next year, thereby improving its revenues. The pricing benefits should primarily be driven by the rising number of AI-powered servers, causing a scarcity in the availability of cutting-edge DRAM and NAND supply. Also, 5G adoption in the IoT devices and wireless infrastructure is likely to spur demand for memory and storage.
The Zacks Consensus Estimate for fiscal 2024 earnings has increased 31.8% over the past 60 days to $1.16 per share, suggesting massive 126.07% year-over-year growth.
MU Estimate Revision