The semiconductor industry is trying to stage a comeback. Sales are steadily increasing and the picture is far better than it was in 2023. Rebounding demand is driving sales and analysts believe that the industry has a lot of potential left.

The Semiconductor Industry Association (SIA) said on May 7 that global semiconductor sales totaled $137.7 billion during the first quarter of 2024, increasing 15.2% year over year. However, sales fell 5.7% from the fourth quarter of 2023.

The SIA said that the decline is temporary and sales are expected to grow at a faster pace in the coming months. According to SIA president and CEO John Neuffer, “First-quarter global semiconductor sales were significantly higher than the total from the first quarter of last year, but sales slipped somewhat on a month-to-month and quarter-to-quarter basis, reflecting normal seasonal trends.”

The semiconductor industry had a dream run during the peak of the pandemic as millions worked from home, leading to a surge in demand for communication devices and other gadgets.

However, price pressures, owing to high interest rates as the Federal Reserve adopted an aggressive monetary tightening policy to curb sky-high inflation, dried up demand. With inflation showing signs of easing in 2023, demand started rebounding, driving sales.

The SIA predicts semiconductor sales to grow double digits for the rest of 2024 as price pressures ease further.

Moreover, the continued excitement surrounding artificial intelligence (AI), particularly generative AI, is expected to drive semiconductor sales in the near term. Experts believe that AI holds significant potential, with much yet to be witnessed by the world.

This is going to drive demand even further as an increasing number of tech companies are exploring the avenue.

Stocks to Watch

Given the promising future, it would be wise to invest in semiconductor stocks like NVIDIA Corporation NVDA, Micron Technology, Inc. MU, NXP Semiconductors NXPI and Texas Instruments TXN, from which investors can gain in the near term. Each of these stocks has a Zacks Rank #2 (Buy) or 3 (Hold) and assures good returns. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

NVIDIA Corporation is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit, or GPU. Over the years, NVDA’s focus has evolved from PC graphics to AI-based solutions that now support high-performance computing, gaming and virtual reality platforms.

NVIDIA has an expected earnings growth rate of 84.7% for the current year. The Zacks Consensus Estimate for current-year earnings has improved 3.1% over the last 60 days. NVDA presently has a Zacks Rank #2.

Micron Technology, Inc. has established itself as one of the leading worldwide providers of semiconductor memory solutions. Through global brands, namely Micron, Crucial and Ballistix, MU manufactures and markets high-performance memory and storage technologies, including Dynamic Random Access Memory, NAND flash memory, NOR Flash, 3D XPoint memory and other technologies. Micron Technology’s solutions are used in leading-edge computing, consumer, networking and mobile products.

Micron Technology’s expected earnings growth rate for the current year is 775%. The Zacks Consensus Estimate for current-year earnings has improved 240.4% over the past 60 days. MU currently carries a Zacks Rank #2.

NXP Semiconductors provides high-performance, mixed-signal and standard product solutions that leverage its RF, analog, power management, interface, security as well as digital processing expertise. NXPI seems well-positioned to capitalize on the level 2-5 automotive market. Additionally, NXP Semiconductors is the leader in general-purpose microcontrollers and application processors in industrial and IoT markets.

NXP Semiconductors’ expected earnings growth rate for next year is 12.8%. The Zacks Consensus Estimate for current-year earnings has improved 1.2% over the past 60 days. Presently, NXPI carries a Zacks Rank #3.

Texas Instruments is an original equipment manufacturer of analog, mixed-signal and digital signal-processing integrated circuits. TXN has manufacturing and design facilities, including wafer fabrication and assembly/test operations in North America, Asia and Europe. Texas Instruments management’s strategy has been to build assets that would be fully utilized through their lifetimes and outsource any excess demand in peak situations to outside foundries.

Texas Instruments’ expected earnings growth rate for next year is 21.1%. The Zacks Consensus Estimate for current-year earnings has improved 0.8% over the past 60 days. TXN carries a Zacks Rank #3.

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