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Investment Opportunities

Best Semiconductor Stocks to Watch in 2022 to Take Advantage of the Chip Shortage

One of the most talked-about storylines this past year has been the chip shortage. And as a result of the higher demand, the best semiconductor stocks are outperforming the overall market.

In fact, the PHLX Semi Index (Nasdaq: SOX) is up +47% from a year ago. By comparison, the popular SPDR S&P 500 ETF (NYSE: SPY) is only up 31%. Furthermore, the trend doesn’t look to be slowing anytime soon. The holiday season is right around the corner, and tech is topping the Christmas list.

Not only that, but semiconductors are seeing higher demand, with industries like 5G and Automotive now requiring them. Of course, who can forget the automotive chip shortage that’s still leaving dealership parking lots empty?

It just goes to show how important these devices are becoming in our everyday lives. I mean, you can go so far as to say we couldn’t function as a society without them.

With this in mind, let’s look at the best semiconductor stocks to watch in 2022 with big growth potential.

The best semiconductor stocks are outperforming the market.

Best Semiconductor Stocks for Value

Although these companies are still growing, they are trading at a lower value when compared to their peers. Additionally, these value stocks offer investors a chance to grab a share of one of the fastest-growing markets.

No. 5 Qualcomm (Nasdaq: QCOM)

  • Market Cap: 188B
  • Annual Revenue Growth: 12%
  • P/E: 20.96

Qualcomm is in a great position as a leading mobile chip supplier to continue its streak of quarterly year-over-year (YOY) revenue growth. Actually, the company’s latest earnings make its 5th consecutive quarter of double-digit yearly growth.

Seeing that Qualcomm’s products are a critical component of Apple’s new iPhone 13, it shows the unit’s potential.

On top of this, the chipmaker is a pioneer in the automotive industry, with its chips powering digital cockpits. In its latest move, Qualcomm is partnering with BMW to fuel self-driving technology. What’s more, the driverless car market is looking to reach +$61 billion in the next five years.

No. 4 Intel (Nasdaq: INTC)

  • Market Cap: 206B
  • Annual Revenue Growth: 5%
  • P/E: 9.82

When listing the best semiconductor stocks, you can’t leave out the biggest chip maker in terms of revenue – Intel. Moreover, Intel is looking to improve its market share with its $20 billion investment in two new facilities.

More importantly, Intel continues to push the limits with its latest Intel Innovation Event unveiling several new advanced products. A few highlights include:

  1. 12th Gen Intel Core Processors – The latest additions to the Intel chip family include over 60 processors that will power +500 devices. The superior technology is capable of powering low-end laptops to more advanced setups.
  2. Artificial Intelligence – The company’s advanced chips are being used to power AI devices, making it easier for developers to build. In fact, Intel chips have been selected to power the U.S Department of Energy supercomputers.

As you can see, the chip-making leader is expanding its abilities to remain a market leader.

No. 3 Taiwan Semiconductor Manufacturing Co. (NYSE: TSM)

  • Market Cap: 611B
  • Annual Revenue Growth: 16%
  • P/E: 29.67

Compared to the others on this list, Taiwan Semiconductor is what’s considered a semiconductor foundry. Or, in other words, TSM can sell its chips to other suppliers such as Qualcomm, Apple, AMD and Nvidia.

The unique business model is a significant reason why TSM is delivering a 17.2% annual growth rate in revenue since becoming a publicly listed company. That’s a pretty impressive growth rate for any industry. Still, it gives you a good idea of how much chips have been fused into our everyday lives.

Although TSM already controls around 63% of the semi market, it’s looking to further its position. With plans to build a new Japan plant with Sony, and rumors of another in Germany, look for the chipmaker to remain a serious contender.

Keep reading to find the best semiconductor stocks.

Best Semiconductor Stocks for Growth

Despite experiencing rapid growth over the past year, these growth stocks are higher valued as investors expect accelerating profits. Let’s see the best semiconductor stocks for ultimate growth.

No. 2 Advanced Micro Devices (Nasdaq: AMD)

  • Market Cap: 183B
  • Annual Revenue Growth: 54%
  • P/E: 46.77

Advanced Micro Devices is an incredible growth story with its stock looking to break out into fresh all-time highs. The company’s high-performance chips are in use, fueling some of our generation’s biggest markets like gaming, virtual reality and data.

For this reason, AMD’s chips are powering the newest gaming devices such as the PS5 and Xbox Series X. Not only that, Tesla (NASDAQ: TSLA) is now using AMD chips to give its infotainment life.

All in all, AMD is growing in all facets. With double-digit revenue growth in the past eight quarters, the chipmaker is looking to strengthen its position. With this in mind, AMD is closing the gap on Intel for computer CPUs. Research from Statista shows AMD processors now make up 39.3% of the market, much higher than its previous share.

Furthermore, the chipmaker is partnering with major brands like Google, Microsoft and Cloudflare to give their products enhanced capabilities. If AMD can continue growing at this rapid rate, look for it to continue being one of the best semiconductor stocks to own.

Best Semiconductor Stocks – No. 1 NVIDIA (Nasdaq: NVDA)

  • Market Cap: 748.8B
  • Annual Revenue Growth: 68%
  • P/E: 107.63

NVIDIA isn’t just one of the best semiconductor stocks to own, but it’s one of the best companies to invest in overall. Just hitting new ATHs, NVIDIA stock looks unstoppable, up 130% since the start of the year.

The growth is well justified as NVIDIA is breaking revenue records with considerable growth coming in the company’s Gaming, Data, and Professional Platform units.

NVIDIAs growth is accelerating. The company’s Gaming unit is up 105% from Q3 2020, Data up 225% and OEM up 186%. If it can continue at this rate, investors should continue seeing the benefits.

Is It Too Late to Invest in the Best Semiconductor Stocks?

If you think it’s too late to invest in these companies, think again. These are the best semiconductor stocks in the world set to continue growing with demand for chips not slowing down anytime soon.

As a matter of fact, the chip market is accelerating, with technology playing such an essential role in everyday life. New research shows the semi market could reach upwards of $600 billion by 2025.

Keep up with the latest industry trends by signing up for Profit Trends. By entering your email below, you can gain free access to the newsletter discovering disruptive markets like computer chips. Check it out today!

Think about it. These chips are fueling the world around us with things like computers, smartphones, and gaming devices. At the same time, data centers, automobiles, and professional businesses rely on this technology.


About

Pete Johnson is an experienced financial writer and content creator who specializes in equity research and derivatives. He has over ten years of personal investing experience. Digging through 10-K forms and finding hidden gems is his favorite pastime. When Pete isn’t researching stocks or writing, you can find him enjoying the outdoors or working up a sweat exercising.

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