3 Semiconductor Stocks to Buy for the Next Bull Run: February 2024

Stocks to buy

Semiconductor stocks have experienced a dramatic divergence in their fortunes over the past year. For chip companies with exposure to AI, business is booming. For everyone else, times are tough.

In fact, despite the AI boom, total global semiconductor sales fell 8.8% in 2023. And if you removed AI-related chips from the equation, the decline would have been far sharper. The cycle has turned quite negative in categories such as memory and analog chips.

While many AI-related semiconductor stocks have soared and now have dubious valuations, there are still real bargains in other parts of the chip space. These are three of the best opportunities today.

Texas Instruments (TXN)

Texas Instruments logo on its world headquarters located in Dallas, Texas.

Source: Katherine Welles / Shutterstock.com

Texas Instruments (NASDAQ:TXN) is the world’s largest analog semiconductor company by market share.

Analog chips are vital because they allow devices to translate real-world information, such as weather conditions, into data that devices can recognize. Analog chips are a huge piece of the Internet of Things theme, as all sorts of appliances and devices can now connect to the Internet and be controlled remotely.

Right now, Texas Instruments has a huge growth opportunity in smart cars. The computing intensity of vehicles is skyrocketing as automakers put everything from increasingly sophisticated entertainment systems to self-driving and more into the next generation of cars. Texas Instruments offers various solutions for the auto market and should enjoy tremendous growth in that field over the next decade.

However, Texas Instruments has seen its stock underperform over the past year as the new car market has dipped amid higher interest rates. That makes for a buying opportunity, as Texas Instruments’ ruthless focus on capital efficiency and its large share repurchase program will continue delivering shareholder value during this current cyclical downturn.

Qorvo (QRVO)

qorvo (QRVO) logo on the screen of a mobile phone

Source: Piotr Swat / Shutterstock.com

Qorvo (NASDAQ:QRVO) is a semiconductor company focused on mobile communications. It makes radio frequency filters, front-end modules and power amplifiers needed to build high-end smartphones.

QRVO stock underperformed in 2023 thanks to the dip in the smartphone market. There was a particular downturn in the Asian market that had analysts concerned. More broadly, Qorvo has significant revenue exposure to Apple (NASDAQ:AAPL), a legitimate risk factor should the iPhone maker ever switch suppliers.

That said, Qorvo shares appear to be significantly undervalued, especially as the smartphone market seems to have bottomed out. Specifically, Qorvo’s most recent quarterly earnings report showed a 44% jump in year-over-year revenue, which exceeded even the high end of the firm’s prior guidance.

And Qorvo is not just a smartphone parts maker, either. It also sells products for other fields, such as television equipment, infrastructure and military purposes and wireless base stations. While Qorvo has concentrated exposure to Apple, Samsung Electronics and other phone makers, that is more than baked into the stock price, with shares at an estimated 17 times 2024 earnings and just 13 times projected 2025 earnings.

Taiwan Semiconductor Manufacturing Company (TSM)

Taiwan Semiconductor, TSMC (TSM) on phone screen stock image.

Source: sdx15 / Shutterstock.com

Taiwan Semiconductor Manufacturing Company (NYSE:TSM) is the world’s largest semiconductor foundry operator. Foundries produce chips for other semiconductor companies that don’t wish to own and operate their own manufacturing facilities.

TSM has built an incredible business with unprecedented operating scale and efficiency. It has more than 56% market share globally. The next closest peer, Samsung, has just a 12% share by comparison.

As the semiconductor industry expands in the coming years, TSM will naturally pick up a large chunk of the market as it grows.

The biggest risk to Taiwan Semiconductor Manufacturing is arguably from politics. Tensions have mounted between China and Taiwan. However, the company is mitigating this risk by investing heavily in overseas facilities in locations such as Arizona. Despite strong earnings and favorable long-term prospects, TSM stock is still available at less than 20 times forward earnings today.

On the date of publication, Ian Bezek held a long position in TXN stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.

Articles You May Like

Three Mile Island restart could mark a turning point for nuclear energy as Big Tech influence on power industry grows
Greenlight’s David Einhorn says the markets are broken and getting worse
Nvidia’s stunning 2024 return has all the makings of a stock-market dynasty
Processed food stocks fall as investors brace for increased scrutiny under Trump, RFK Jr.
‘I’m 38 and completely broke’: I earn $50,000 a year. What professional degree will guarantee me six figures?