3 Stocks To Buy As The Semiconductor Shortage Persists

And, it’s not surprising that the world is facing a supply crunch. Many fabricators are investing in new capacity which will take many years to come online. Recently, Commerce Secretary Gina Raimondo said that “For the next year or so, this will be a daily challenge.” 

3 Stocks to Buy

Therefore, I believe that investors should continue to invest in the industry as the supply crunch will result in increased pricing power. Over the last few months, valuations have started to improve, while a handful of stocks have started to break out to new highs. Three of the best-positioned semiconductor stocks are Applied Materials, Broadcom, and Texas Instruments.

Applied Materials (AMAT)

AMAT provides manufacturing equipment, services, and software to the semiconductor, display, and related industries, and it operates through three segments: Semiconductor Systems, Applied Global Services, and Display and Adjacent Markets. AMAT is one of the companies that is benefiting from the chip shortage and is also investing in new capacity. 

The company’s strong momentum is evident in its recent earnings report which showed a 41% increase in revenue to $5.6 billion and a 76% increase in net income to $1.33 billion. Margins have also been trending higher. 

These types of results tend to lead to analysts hiking their forecasts. For Q3, they are expecting EPS and revenue to increase by 45% and 29%, respectively. The company also has a streak of beating expectations for four straight quarters. 

AMAT’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. This isn’t surprising given that AMAT is one of the few semiconductor manufacturers during a global shortage. It also isn’t surprising that AMAT has a B grade for Quality given its strong management team and track record of topping earnings expectations. 

To see more of AMAT’s POWR Ratings, click here.

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