The top semiconductor stocks to watch in 2021

With the ever-growing demand for semiconductor devices, Maxim Manturov, Head of Investment Research at Freedom Finance Europe, advises on the hottest semiconductor stocks to watch in 2021.

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Semiconductors power much of the world’s technology, making it possible for families and friends to talk face-to-face from across the ocean or for Wall Street to move billions of dollars in the blink of an eye. And with more applications being produced worldwide, demand for semiconductor devices only continues to grow.

The popularity of such stocks therefore comes as no surprise, given the immense earning potential for investors in a growing market. That being said, those willing to invest must know what they are getting into before choosing to splash the cash.

Growth drivers and investment outlook

The semiconductor market resisted the backlash from the global pandemic and related economic crisis, posting a 6.5% increase in earnings over 2020. This growth is only likely to continue with the mass adoption of Internet of Things (IoT) and 5G, as well as the rising demand for semiconductors in the automotive industry. In fact, 79% of management of various semiconductor companies expect their return on investment (ROI) to rise in 2021 compared to 2020, while 85% say their companies will have higher earnings.

This is down to the fast development of semiconductor technologies across the board, stemming from the work-from-home trend, as well as remote education and entertainment. In turn, this has led to higher demand on microchip-based products; the semiconductor companies responded to this by adjusting to new market needs. Potential growth is therefore based on connectivity technologies involving IoT, 5G, and automobiles, as such technologies use a huge number of microchips, which the semiconductor companies will be supplying.

Long-term investors should consider the semiconductor market

There is a risk, of course, that investments into new facilities against rising demand may come ahead of base demand, which will put microchip prices under pressure. This risk, however, is low and temporary. Meanwhile, positive long-term potential can be backed by flexible work-from-home technologies, demand for cloud services, and faster 5G adoption. Another thing, which is more permanent than cyclic, is the rising demand for microchips in the automotive industry, with greater electric vehicle market share and a better technology stack.

Top semiconductor stocks for 2021

With the industry continuing to grow there are a plethora of organisations that are worth investing in but what are the top semiconductor stocks for 2021?

  1. Applied Materials Inc (AMAT): A company supplying production equipment, as well as software and services for semiconductor, display, and related industries. The average target price is at $156.20 (17.50% upside potential).
  2. NVIDIA Corporation (NVDA): A global enterprise working in both graphics and computing and network domains. The average target price is at $682.20 (15% upside potential).
  3. Broadcom Inc (AVGO): A company that creates markets software for semiconductor infrastructure. The average target price is at $526 (16% upside potential).
  4. Micron Technology Inc (MU): A company supplying DRAM devices across the globe for cloud servers, graphics, networks, and mobile devices. The average target price is at $119 (38% upside potential).
  5. QUALCOMM Incorporated (QCOM): A company that creates markets core technologies and products for mobile and other wireless devices, such as network equipment, broadband gateways, consumer electronics, and other connected devices across the globe. The average target price is at $170 (23% upside potential).
  6. Lam Research Corporation (LRCX): This company manufactures and markets semiconductor processing equipment used for integrated circuit production. It also engages in repair and maintenance. The average target price is at $740 (17% upside potential).
  7. Advanced Micro Devices Inc (AMD): A world-renowned semiconductor manufacturer working in both computing and graphics niches. The average target price is at $107 (35% upside potential).

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