Top 5 Best Semiconductor Stocks to Watch in 2022
Semiconductors (and hence semiconductor stocks) are considered to be the most crucial component of every technological end market.
Should you be trading and/or investing in what can possibly be considered the best semiconductor stocks on the market? What are the top 5 best semiconductor stocks for 2022?
This article will outline potentially the best semiconductor stocks for 2022, explaining also how you can trade and invest in the companies you may find suitable for your portfolio.
Table of Contents
What are Semiconductor Stocks?
The demand for various technology in our world today, whether that be Electric Vehicles, Artificial Intelligence, mobile devices, among others, has been on a huge incline since the pandemic.
To put it simply, semiconductor companies are the design and manufacturing forces which develop the core functions behind the overall (and vast) electronic industry.
This subsequently means that semiconductor equipment like microprocessors and chips are in short supply.
The year 2021 as a whole saw an increase of semiconductor sales. In just October 2021 alone, sales hit $48 billion – an increase of 24% from October 2020. Semiconductor sales are expected to exceed $600 billion in 2022.
With Metaverse stocks a growingly popular topic, as Artificial Reality (AR) and Virtual Reality (VR) offerings are advancing, this will only put more pressure on the semiconductor industry.
When it comes to defining ‘what are semiconductor stocks’, we first should sum up the industry behind these companies.
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Who is the Biggest Semiconductor Maker?
The biggest maker of semiconductors by market share is by far, Taiwan Semiconductor Manufacturing Company (TSM).
TSM both designs and manufactures semiconductors, giving them much flexibility and capability to dominate the market.
TSM trades both on the New York Stock Exchange (NYSE) and Taiwan Stock Exchange (TWSE).
Are Semiconductor Stocks Good to Trade or Invest in?
As always, this kind of question always poses a subjective answer. Also, be sure you understand the difference between trading and investing.
In the most general sense, one may say given the current state of the tech industry, that yes, semiconductor stocks are a plausible trading or investment product.
These kinds of questions require a subjective answer for the simple fact that everyone's industry knowledge and risk tolerance are different.
For a trader or investor who focuses on both various and overall tech industries, it would make sense to pay attention to the well performing and upcoming semiconductor stocks.
If you feel this is an area that may be suitable for your portfolio, you have the option to both trade and invest in various semiconductor stocks through the well-known platform, MetaTrader 5.
If you are registered as an Admirals client, you have free access to this tool, among others.
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What are the Top 5 Best Semiconductor Stocks 2022?
When reviewing the top 5 best semiconductor stocks, below, it is important to keep in mind that the stocks were chosen based on the methodology of the author.
Based on the macro-economic environment, the following chosen stocks are the ones potentially foreseen to have the most viable solutions in the market and hence, the most growth potential.
1. Taiwan Semiconductor Manufacturing Co Ltd (TSM)
As it may come to no surprise, TSM takes the top spot for best semiconductor stock, given they have the majority global share of the market.
If you decide to pay attention to this market sector, this could be seen as a staple for a long-term investment portfolio, given their capital expenditures plan to continue dominating market share, as shown below:
Source: Bloomberg; displaying capital expenditures (CapEx) from 2018-2021, as well as projected CapEx for 2022, by comparing the best semiconductor company by market share, TSM, and Intel, another leading semiconductor producer. Captured on January 25th, 2022.
According to Yahoo!Finance as of January 25th, 2022, TSM's 52-week range ranges from $107.58 - 145.00 and the day range, $120.13 - 126.07. What does this tell us?
- The stock is somewhat volatile (reflecting that of its industry), generally ideal for short-term trading positions.
- Given the industry projection as a whole, the stock entry price for a long-term investment is reasonable.
- On the contrary, the cyclicality of the semiconductor market can make future earnings uncertain.
2. Intel Corp (INTC)
Given Intel's well-known reputation and the fact that it is one of the world's main chip manufacturers, it is certainly worth in the second top spot for best semiconductor stocks in 2022.
What other reasons should we consider?
- Intel plans to build the world's biggest semiconductor manufacturing site in Ohio, USA, in 2022
- According to Zacks.com, Intel has a trailing-12-months P/E (Price / Earnings) of 8.80X (compared to a 25.23X of the general Semiconductor industry rate). The 8.80X of Intel shows the stock could be undervalued.
- As of January 25th, 2022 on Yahoo!Finance, INTC's price sits around $51, with a 52-week range of $47.87 - 68.49, meaning the current price could be a good entry point.
- To give an equal pro and con viewpoint, Intel has had its fair share of rallies and selloffs over the years.
3. Nvidia (NVDA)
Nvidia has been a top stock on many investors' watchlists for various reasons, as its pioneered chip tech in graphic processing units (GPUs) takes an effect on mostly all thriving industries currently.
Not to mention, NVDA continues to break through all-time highs since April 2021.
- Nvidia aims to impact the Metaverse with proprietary applications, such as the Omniverse software.
- Nvidia currently supplies Amazon (AMZN) with chips for its Web Services.
- Nvidia designs and manufactures chips for cryptocurrency mining, known as cryptocurrency mining processors, or CMPs.
- On the contrary of the positives, Nvidia will likely face increased competition in the near future.
There are much more newsworthy points to add to the case of Nvidia.
4. Advanced Micro Devices Inc (ADM)
ADM has been a strong competitor as a rival semiconductor company; however, they have a slightly different business process.
It is known as one of the main semiconductor companies who went 'fabless', meaning ADM outsources the manufacturing of its processors, unlike the preceding companies mentioned in this article.
Does the decision of going fabless act in the company's favour, lowering their capital costs, allowing them to focus on strictly development?
- As shown in Yahoo!Finance's AMD Financials, the Total Revenue has risen substantially, compared to the steadier and more gradual rise in the Cost of Revenue – Likely thanks to the move of outsourcing.
- AMD's CEO, Lisa Su, is constantly improving speed and performance of the nanometer scale – Beyond that of its rival, Intel (7-nanometer, compared to 10-nanometer).
- On a contrary note, AMD has faced accusations of a lower-quality product in the past.
5. Micron (MU)
Lesser known that its competitors, Micron could be a hidden gem of a semiconductor stock pick.
A global leader and maker of memory and storage products (specifically dynamic random access memory, or DRAM), Micron has seen a sizeable increase in demand as memory chips are needed both for cloud computing and 5G networks.
- Morgan Stanley quoted (see Analyst Comments) the base price target of $75, with a high of $120 and absolute low of $40 in 2022 – A scenario which could be recommended for both short-term trading and long-term investing.
- If you see Micron's 5-year chart, the long-term growth, although volatile, is gradual growth – particularly in 2021 and 2022. The volatility in the short-term expresses there are many options for trading, especially when you can both Buy and Sell on both price directions (as with CFD trading).
- Adversely, the need for DRAMs has decreased as Cloud solutions become more popular - DRAMs being the core offering of Micron.
What is the Best Semiconductor ETF?
Whether short-term ETF trading or investing in ETFs for the long-term, both can have a viable place in your portfolio and strategy.
ETFs can be a good option for investors, as each ETF encompasses multiple assets which are generally relevant to each other based on the industry, for example in the case of the semiconductor industry and hence semiconductor stocks.
There are quite a few Semiconductor ETFs on the market – But which one is the Best Semiconductor ETF?
The iShares PHLX Semiconductor ETF (SOXX) is not only the most popular Semiconductor ETF, it is also the most expensive in share price. Its total asset value sits at $8,826.53($MM).
You can Buy (or Sell) the SOXX ETF CFD at Admirals as well.
By ranking based on total asset value, the SOXX ETF is technically the best Semiconductor ETF.
Second runner up at $8,174.95($MM) in total asset value is VanEck Vectors Semiconductor ETF (SMH). This fund tracks the overall performance of the top 25 US-listed Semiconductor companies, making it a diverse option in this vertical.
You can trade the SMH ETF CFD on both price directions.
The last of the top 3 best semiconductor ETFs would be Direxion Daily Semiconductor Bull 3x Shares ETF (SOXL), with total asset value at $5,135.10($MM).
Are Semiconductor Stocks a Buy?
The semiconductor industry, specifically referring to semiconductor stocks, is a large, broad world with many companies involved – companies which design and manufacture products which are crucial to our way of modern living.
As I wrote in the opening statement of this article, semiconductors are truly the backbone, or brains, of every single piece of technology we use.
Are you investing or trading semiconductor stocks? What do you consider to be the best semiconductor stocks on the market today?
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