In this article, we discuss the 10 best performing semiconductor stocks of 2021. If you want to skip our detailed analysis of these stocks, go directly to the 5 Best Performing Semiconductor Stocks of 2021.
Semiconductor companies have witnessed a dramatic increase in revenue this year as a chip shortage, due to supply chain pressures and surging demand, hits major industries like consumer electronics, auto manufacturing, and even the software universe, fueling an unprecedented hike in chip prices. The situation has forced United States President Joe Biden to incentivize chip manufacturing in the country in a bid to decrease American reliance on Chinese chipmakers. These chips are a critical component of the modern-day defense technologies as well.
According to a report by the Semiconductor Industry Association, a trade association based in Washington, more chips were shipped to customers in the third quarter of 2021 than in any other quarter since records started being kept. The body estimates that between June and September this year, global sales of semiconductors stood at close to $145 billion, up over 27% year-on-year and close to 7.4% quarter-over-quarter. In September alone, nearly $50 billion worth of chip sales were made.
With supply shortages unlikely to end in the coming months, even as demand rises, investors could ride this boom in the chip industry. Some of the top semiconductor stocks to buy now include NVIDIA Corporation (NASDAQ:NVDA), Advanced Micro Devices, Inc. (NASDAQ:AMD), and ASML Holding N.V. (NASDAQ:ASML), among others discussed in detail below.
These were picked based on their year-to-date gains (as of November 29). Analyst ratings and business fundamentals of each company are also discussed to provide readers with some additional context for their investment choices. The hedge fund sentiment around each stock was calculated using the data of 867 hedge funds tracked by Insider Monkey.
Semiconductor Stocks that Doubled in 2021
10. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 67
Year-To-Date Gain: 9%
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) markets integrated circuits and semiconductors. The stock has rallied since reports indicated that Apple had selected the company for the manufacture of Apple-designed 5G modems in new iPhones.
Cowen analyst Krish Sankar recently initiated coverage of Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stock with a Market Perform rating and a price target of $120, noting that the demand for the products of the firm may be peaking.
At the end of the third quarter of 2021, 67 hedge funds in the database of Insider Monkey held stakes worth $9.5 billion in Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM), up from 64 in the preceding quarter worth $10 billion.
Just like NVIDIA Corporation (NASDAQ:NVDA), Advanced Micro Devices, Inc. (NASDAQ:AMD), and ASML Holding N.V. (NASDAQ:ASML), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is one of the stocks that institutional investors are buying.
In its Q1 2021 investor letter, Bonsai Partners, an asset management firm, highlighted a few stocks and Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) was one of them. Here is what the fund said:
“Taiwan Semiconductor is the world’s largest outsourced foundry of logic semiconductor chips. TSMC’s shares appreciated 8.9% during the quarter.
Similar to last quarter, the supply-demand imbalance in semiconductor chips continues to benefit TSMC. To fuel new technological advances and meet the current supply imbalance, we see significantly increased capital spending across the industry over the coming years.
TSMC has an extraordinary track record of return on these large investments despite their rapid historical cadence of expansion. I remain hopeful that the large capital expenditure plan they now have ($100 billion of investment over the next three years) will be money well spent and not lead to industry oversupply in the medium term. Hopefully, future returns on these investments will look as good as those of the past.”
9. Micron Technology (NASDAQ:MU)
Number of Hedge Fund Holders: 63
Year-To-Date Gain: 13%
Micron Technology (NASDAQ:MU) makes and sells memory and storage products. The company recently revealed that it had settled a long-standing dispute with United Microelectronics Corporation and reached an agreement under which the latter would pay the former an undisclosed amount, removing a regulatory cloud over both firms.
In late October, Micron Technology (NASDAQ:MU) had announced that it would be investing $150 billion into memory research and development, including US-based fabrication, and other chip-related projects over the next decade.
At the end of the third quarter of 2021, 63 hedge funds in the database of Insider Monkey held stakes worth $3.8 billion in Micron Technology (NASDAQ:MU).
“Micron is a manufacturer of memory semiconductor chips. Micron appreciated 17.3% during the quarter.
With the semiconductor cycle in full swing, sentiment continued to improve for major DRAM and NAND suppliers. Spot pricing for DRAM continues its upward march due to supply shocks across the industry and sustained demand levels that continue to outstrip supply.
As a result, Micron showed improving results for the fiscal first quarter, raised guidance intra-quarter for the fiscal second quarter, and offered strong guidance for the fiscal third quarter in both growth and margins.
While the cyclical nature of DRAM hasn’t changed, the cycles themselves continue to become more benign, leading to long-term economic improvement across these businesses. Micron is now continuously profitable, with industry players in a dramatically stronger position than even just five years ago.
The biggest negative surprise in the quarter came from Micron’s exit from its 3D XPoint hybrid memory business. The company also announced its decision to sell its accompanying Utah fab. Fortunately, this development does not alter the investment thesis much since 3D XPoint was an option ticket for future growth. While it’s unfortunate this product didn’t pan out, now is an excellent time to sell a fab, so perhaps it is a blessing in disguise?”
8. QUALCOMM Incorporated (NASDAQ:QCOM)
Number of Hedge Fund Holders: 70
Year-To-Date Gain: 20%
QUALCOMM Incorporated (NASDAQ:QCOM) develops and sells foundational technologies for the wireless industry. The company has decided to separate the Snapdragon chipset from other chips made by the firm. Snapdragon chips are found in most high-end smartphones.
On November 17, investment advisory Mizuho maintained a Buy rating on QUALCOMM Incorporated (NASDAQ:QCOM) stock and raised the price target to $195 from $170, highlighting the strong 5G connectivity roadmap of the company with solid growth outlook.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in QUALCOMM Incorporated (NASDAQ:QCOM) with 3.8 million shares worth more than $502 million.
“Long position Qualcomm Inc. were among the top detractors from performance. Qualcomm is a leading semiconductor company with strong positions in telecommunications end markets that position the company as a primary beneficiary of the innovative 5G network standard roll out. Qualcomm is acknowledged as having the best technology specs for 5G chip sets as evidenced by signing up all 75 major OEMs including Apple. Additionally, beyond handsets, Qualcomm has meaningful growth drivers, including the Internet of Things, automobiles, industrials and gaming that provide the company with potential for generating increased earnings.
While Qualcomm was a notable positive contributor to the portfolio’s absolute and relative returns in 2020, during the first quarter, the share price declined and the position detracted from performance. Market demand for chips has been strong; however, Qualcomm hasn’t been able to fully exploit the demand as it is capacity constrained. Expectations were high for Qualcomm and while the quarter generally exceeded consensus estimates and forward estimates did rise, the street was anticipating a stronger positive surprise. We believe the production capacity constraints should abate in the second half of this year.”
7. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 50
Year-To-Date Gain: 29%
Broadcom Inc. (NASDAQ:AVGO) markets semiconductor infrastructure software. The stock has soared in the past few weeks as regulatory bodies settled monopoly charges against the company and analysts upgraded the stock ahead of an investor day presentation.
Broadcom Inc. (NASDAQ:AVGO) smashed market estimates on earnings per share and revenue for the third fiscal quarter by $0.05 and $20 million respectively. It was also named as the Google Cloud customer of the year in October.
Among the hedge funds being tracked by Insider Monkey, Chicago-based investment firm Citadel Investment Group is a leading shareholder in Broadcom Inc. (NASDAQ:AVGO) with 1.1 million shares worth more than $568 million.
“A good way to conceptualize how we think about portfolio construction is to picture a pyramid. At the bottom of the pyramid are the durable compounding growth companies that form the strong foundation, resilience and consistency for the Strategy. We think these companies should comprise just under half of portfolio assets and feature annual revenue growth rates ranging from two times GDP up to 20% as well as healthy free cash flow generation.
Broadcom has delivered similar long-term appreciation through a combination of organic growth, capital deployment into new and adjacent opportunities through merger and acquisition activity as well as returning capital to shareholders through buybacks and dividends.”
6. NXP Semiconductors N.V. (NASDAQ:NXPI)
Number of Hedge Fund Holders: 51
Year-To-Date Gain: 39%
NXP Semiconductors N.V. (NASDAQ:NXPI) develops and sells various semiconductor products. The company has a decent dividend history and recently declared a quarterly dividend of $0.5625 per share, in line with previous. The forward yield was 1.02%.
KeyBanc analyst John Vinh recently raised the price target on NXP Semiconductors N.V. (NASDAQ:NXPI) stock to $255 from $250 and kept an Overweight rating, forecasting long-term revenue growth of at least 10% for the company.
Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in NXP Semiconductors N.V. (NASDAQ:NXPI) with 929,591 shares worth more than $182 million.
Alongside NVIDIA Corporation (NASDAQ:NVDA), Advanced Micro Devices, Inc. (NASDAQ:AMD), and ASML Holding N.V. (NASDAQ:ASML), NXP Semiconductors N.V. (NASDAQ:NXPI) is one of the stocks attracting the attention of hedge funds.
“Within IT, we have also increased exposure to a cyclical semiconductor industry currently working through a severe supply shortage due to several years of capacity reductions, COVID-19 shutdowns and one-off production delays as well as demand resilience in areas like autos and smartphones. Two recent additions, specialty semiconductor maker (including) NXP Semiconductors, was among the portfolio’s leading contributors in the first quarter. NXP rose as auto production ramped up and electric vehicle sales continued to expand.”
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Disclosure. None. 10 Best Performing Semiconductor Stocks of 2021 is originally published on Insider Monkey.