Forget Nvidia: 3 Semiconductor Stocks You Should Buy Instead - Latest Global News

Forget Nvidia: 3 Semiconductor Stocks You Should Buy Instead

If you would like to invest in the semiconductor industry, there are many reasons to do so. Semiconductors are in countless things we use every day – including our smartphones, cars and even toothbrushes.

Furthermore, the industry is expected to grow solidly in the coming years. Estimates vary, of course, but according to the folks at Allied Market Research, the semiconductor market is expected to nearly double in size between 2021 and 2031, reaching $1 billion. The Semiconductor Industry Association recently reported that global semiconductor industry sales increased 15% year-over-year in January 2024.

Probably the most attractive semiconductor stock is Nvidia, due in large part to its tremendous recent growth. Over the last decade it has risen a staggering 19,000%, averaging an annual gain of 69%. For context: the S&P 500 recorded an average increase of almost 12% over the same period. However, according to some analysts, Nvidia shares may have outperformed and may be falling in price.

If you agree, you’re not out of luck. There are other semiconductor stocks with seemingly more attractive valuations. Here are three to consider—plus a bonus idea.

1. Skyworks Solutions

Skyworks Solutions (NASDAQ:SWKS)The company, with a current market value of nearly $15 billion, focuses on wireless networking technology and counts among its customers Amazon, Apple, alphabet, Broadcom, Samsung and many other big names. In total, the company has more than 8,000 customers, approximately 4,900 patents and a 30% increase in operating cash flow in fiscal year 2023 compared to the previous year.

Shares recently fell after the company reported solid second-quarter results but warned of weakness in wireless that could impact operations for a while. This may not be welcome news, but the stock may offer a more attractive entry price for those who want to own it for the long term and expect mobile recovery and long-term growth.

A tailwind for Skyworks Solutions could be the proliferation of smartphones with artificial intelligence.

2. Infineon Technologies

Infineon Technologies (OTC:IFNNY) is a Germany-based semiconductor company currently valued at approximately $52 billion that focuses on industrial and automotive chips. The automotive chip niche is expected to grow over time as more electric vehicles are manufactured and countless sensors are used for various smart car and safety features.

Infineon’s recently released second-quarter results reflected “continued weak demand in key target markets”: revenue fell 12% year-over-year and adjusted earnings per share fell 39%. However, free cash flow improved to 82 million euros, after a loss of 1.6 billion euros in the previous year. And Infineon is focusing on its cost structure to increase its competitiveness.

Not surprisingly, Infineon’s shares were in decline for much of the year. This represents an opportunity for long-term investors. The lower price has also caused the share’s dividend yield to rise to 1%. (The dividend was increased by 14% last year.)

3. STMicroelectronics

STMicroelectronics (NYSE:STM)The Geneva-based company, with a current market value of nearly $36 billion, employs more than 50,000 people, of which more than 9,500 work in research and development (R&D), which bodes well for future new and improved offerings. (The company also has around 20,000 patents.) It’s another major supplier of automotive and other chips that still has big growth ahead of it.

While many chipmakers simply design chips to be built by others, STMicroelectronics notes, “We believe in the benefits of owning manufacturing facilities and operating them in close proximity and coordination with R&D departments.” This type of vertical integration will likely to give the company an advantage over some competitors.

Bonus idea: The VanEck Semiconductor ETF

While the stocks mentioned above don’t exactly scream bargains, they appear to be attractively valued, with significantly lower price-to-sales ratios and forward-looking price-to-earnings ratios than Nvidia. You could invest in whatever interests you, especially if you want to hold for many years, or you could invest in dollars on average and buy stocks in installments over a longer period of time. You could do the same with Nvidia shares, as they appear to do well in the long run, even though their short-term growth may not be rapid.

Here’s another idea: Instead, consider a semiconductor exchange-traded fund (ETF) that quickly spreads your money across many stocks in the industry. A good candidate is this VanEck Semiconductor ETF (NASDAQ:SMH), which includes Nvidia and about 24 other companies. With an average annual profit of 27% over the last decade and a reasonable expense ratio (annual fee) of 0.35%, the company has shown strong performance.

Whichever way you go about it, semiconductor stocks are generally very promising. Just try to buy them when they seem reasonably valued or, better yet, undervalued. And then stay updated with their progress as it is a dynamic industry.

Should you invest $1,000 in Infineon Technologies Ag now?

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Selena Maranjian has positions at Alphabet, Amazon, Apple and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple and Nvidia. The Motley Fool recommends Broadcom and Skyworks Solutions. The Motley Fool has a disclosure policy.

Forget Nvidia: 3 Semiconductor Stocks to Buy Instead was originally published by The Motley Fool

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