2 Chip Stocks That Could Soar In Q2 2021

Board, Electronics, Computer, Electrical Engineering

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A global shortage of semiconductors is having negative ramifications on many industries. Just this week Ford Motor Co. (F) warned that they could miss out on $1 billion to $2.5 billion in sales because of the chip deficit. However, this situation has been a boon to the semiconductor industry and many chip stocks. Through the first three months of the year, the PHLX Semiconductor Sector Index (SOX) was up 11.8%, compared to the S&P 500’s 5.8% gain.

The demand for chips was already high due to the rollout of 5G. Still, demand skyrocketed as millions of people were forced to stay at home due to the pandemic. Suddenly, sales of laptops and gaming consoles soared. And now that automobile manufacturers have reopened their plants, the demand for semiconductors has exploded with not enough chips to go around.

These shortages reflect a tight supply, but not a lack of demand, which means the chip rally should continue into summer. As the market has been retreating in recent days, it provides an opportunity to pick up chip stocks on the dip. That is why I am recommending two Buy-rated semiconductors that should see their shares rise in the months ahead: Intel Corp. (INTC) and Broadcom Inc. (AVGO).

Intel Corporation (INTC

INTC is one of the world’s largest chipmakers. It designs and manufactures microprocessors for the global personal computer and data center markets. The company has been gradually reducing its dependence on its PC-centric business and moving into data-centric businesses like artificial intelligence (AI) and autonomous driving.

Its data businesses accounted for almost half of all revenue in 2020. As more devices become interconnected, this bodes well for INTC’s prospects. Data centers that facilitate information stored and analyzed are mainly run with INTC server chips. But we can’t count out its PC business yet. INTC holds a dominant market share for microprocessors in the consumer and enterprise markets.

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