The epic semiconductor may have more room to run.
With U.S. China trade tensions fading with a Phase One deal, 5G, and continued big demand for memory chips, the run in semiconductor stocks may have only just begun. Better, according to IHS Markit, global semiconductor revenue could rebound to $448 billion this year.
“Throughout the history of the semiconductor industry, every market downturn has ended with the arrival of a technical innovation that spurred a major increase in demand,” said Len Jelinek, senior director, IHS Markit. “In the past, these innovations have had momentous impacts, such as the advent of the world wide web or the introduction of the iPhone.”
“Now another historic innovation is set will take its place among these advances: 5G. However, 5G’s impact will spread far beyond the confines of the tech industry, impacting every aspect of society and driving new economic activity that will spur rising demand for microchips,” they added.
It’s no wonder stocks like Advanced Micro Devices (AMD), NVIDIA (NVDA), and Micron Technology (MU) are skyrocketing.
Advanced Micro Devices (AMD)
Since 2020 began, shares of AMD have exploded from a low of $49.10 to $55.31 with plenty of potential upside remaining. The company is still crushing competitors like Intel (INTC) and NVIDIA (NVDA). It’s also running higher on news it’ll provide chips for the new PlayStation and XBOX consoles hitting shelves this December 2020.
RBC Capital Markets just raised its price target on the AMD stock to $66 after better than expected earnings. “We are increasing our multiple on AMD due to higher conviction in overall demand for gaming and server chips,” they said, as quoted by MarketWatch. “We believe AMD has made the correct long-term bets that will pay off over the next 12 months and beyond.”
NVIDIA (NVDA)
Since the year began, NVDA has run from a low of $236.72 to a current high of $289.79.
All after solid earnings growth. The company posted a 56% gain in gaming sales year over year to $1.49 billion. It also posted a 43% jump in data center sales to $968 million, which is more than $140 million above estimates for $825.8 million.
Nvidia reported fourth-quarter net income of $950 million, or $1.53 a share, compared with $567 million, or 92 cents a share, in the year-ago period. Adjusted earnings were $1.89 a share. Total revenue rose to $3.11 billion for its first gain in four quarters, as also noted by MarketWatch.
Micron Technology (MU)
Micron is another high-flier, running from a low of $54.51 to a current price of $58.50. All thanks to the coming 5G boom, which will require a combination of DRAM and NAND memory. MU is also running on a UBS upgrade to a buy from neutral with a target of $75.”After only modestly outperforming the S&P 500 over the past two years, we believe the time has finally come when Micron can materially outperform over a sustained period of time,” they wrote, as quoted by MarketWatch. “We consider both the cyclical and structural aspects to both Micron and the memory industry as a whole and conclude that Micron is in a much stronger position in a structurally better industry on the cusp of a cyclical upswing that, for DRAM, should last deep into C2021.”
