3 Undervalued Chip Stocks To Scoop Up In May

Board, Electronics, Computer, Electrical Engineering

Image Source: Pixabay

As the demand for consumer electronics has increased worldwide as individuals and organizations seek to stay connected remotely amid the COVID-19 pandemic, the demand for semiconductor chips that are needed to run these gadgets is on the rise. This, along with rising demand for semiconductors from the booming electric vehicle (EV) industry has created a huge supply shortage.

However, the resultant increase in chip prices has been working to the benefit of the chip manufacturers. This has attracted significant investor attention to the semiconductor space, as is evidenced by the SPDR S&P Semiconductor ETF’s (XSD) 59.1% returns over the past year versus the SPDR S&P 500 ETF’s (SPY) 41.4% returns.

With the growing applicability of chips in the tech era, which includes Internet of things (IoT), Artificial intelligence (AI), EV, 5G network, data centers, and cloud computing, the demand for chips should keep rising. According to Research and Markets, the global semiconductor market is expected to grow at a 6%-plus CAGR between 2021- 2026.

Furthermore, President Biden announced last month that he has bipartisan support for his proposed $50 billion in spending to address the semiconductor shortage, which is a testament to the industry’s importance and immense potential.

Given this favorable backdrop, we think it is wise to bet on STMicroelectronics N.V. (STM), Vishay Intertechnology, Inc. (VSH), and O2Micro International Limited (OIIM). They are still trading at reasonable valuations and have immense growth potential.

STMicroelectronics N.V. (STM)

Headquartered in Geneva, Switzerland, STM designs, develops, manufactures, and markets semiconductor products across Europe, Middle East, Africa, America, and Asia Pacific. It operates through three segments: Automotive and Discrete; Analog, MEMS and Sensors; and Microcontrollers and Digital ICs. Its offerings include automotive integrated circuits (ICs), application-specific integrated circuits (ASICs), and radio frequency (RF).

On May 6, STM launched a new family of ST Intelligent and Integrated Gallium Nitride (GaN) solutions—STi2GaN. Because the unique product combines the power and intelligence in compact, high-performance solutions, it is expected to drive up the company’s sales in the near-term.

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