In this piece, we will take a look at Goldman Sachs' top semiconductor stock picks. If you want to skip our introduction to the institutional investor and the semiconductor industry, then take a look at Goldman Sachs Semiconductor Stocks: Top 5 Stocks.
The Goldman Sachs Group, Inc. (NYSE:GS) is one of the largest investment banks in the world. And like other big banks, it also has an investment portfolio that is worth billions of dollars. According to Insider Monkey's research, Goldman Sachs' investment portfolio was worth a whopping $496 billion as of Q2 2023 end, which marked a robust $28 billion quarterly growth at a time when the stock market was facing pressure from rapid interest rate hikes from the Federal Reserve. Annually, between Q2 2022 and Q2 2023, Goldman Sachs' investment portfolio gained $54 billion, indicating that while others were hesitant about tinkering with the stock market, the bank was quietly piling in billions of dollars in stocks with the hopes of making a return.
However, while its stock portfolio might have grown, Goldman has become one of the most troubled big American banks as of late. These days, the investment bank is in the midst of a refocusing effort that aims to pivot away from its foray into the retail sector of the banking and investment market. The Fed's rapid interest rates haven't been kind to Goldman, as alongside the broader turmoil in the hedge fund industry last year, its revenue dropped by $12 billion annually during 2022. At the heart of its turmoil is the Marcus business division that sought to leverage Goldman's reputation within the institutional banking industry and attract deposits from retail clients. But a lack of profitability hampered big retail plans, and now, Goldman Sachs is pivoting back to wealth management.
It has merged its asset and wealth management divisions, and this decision is part of a broader strategy to shift away from the cyclical nature of stock market investment to the more steady stream income that Goldman Sachs can earn from management fees. And just like with Marcus, Goldman also has big plans for the Asset and Wealth Management (AWM) business division, as the firm's AWM lead Marc Machmann believes that AWM can contribute as much as a third of the bank's annual revenues within the next two years.
At the same time, with one eye on the future, Goldman Sachs is also focusing on reducing costs to steady the ship short term. According to sources speaking with the New York Post, the bank is quietly laying off hundreds of employees with the bulk of these belonging to AWM and global markets business divisions. Naturally, some of these are due to the AWM merger which leaves several positions unnecessary, yet the fact that Goldman Sachs' third quarter of 2023 earnings report saw its net income drop by 33% annually to $2.1 billion is undoubtedly playing a role in the layoffs.
Just like Goldman Sachs, the global semiconductor industry hasn't been doing too well as of late. Like the oil industry is the backbone of global transportation, energy generation, and industrial sectors, semiconductors, commonly called 'chips' sit at the heart of the technology industry - both figuratively and literally. However, while the semiconductor industry boomed in the wake of the coronavirus pandemic, the contributing factors behind this out performance that saw chip companies such as NVIDIA Corporation (NASDAQ:NVDA), Advanced Micro Devices, Inc. (NASDAQ:AMD), and the Taiwan Semiconductor Manufacturing Company (NYSE:TSM) post record revenues also led to their sales dropping last year and in 2023.
This was because firms like AMD and NVIDIA - which order chips from companies like TSMC - relied on the high demand for electronics during the COVID era to make their orders for 2022. However, inflation struck the market in 2022, sapping demand for pricey processors, graphics cards, and laptops. This left the chip designers with excessive inventories in the pipeline and contributed to an overall slowdown as markets slumped.
Since then, analyst calls from the top chip companies have focused on this 'inventory correction', and with 2023 now coming to an end, it appears that the glut might be clearing up. For instance, consider recent remarks from Holtek Semiconductor Inc. (TPE:6202.TW), whose management believes that chip inventory correction will last for two more quarters before inventory levels stabilize. This sentiment is also echoed by AMD's latest financial results, which saw sales of the firm's latest Ryzen 7000 series jump by 43% annually in a sign that buyers were finally opening their wallets.
So, as the chip sector might finally be starting to pick up the steam once again, we decided to take a look at Goldman Sachs' top semiconductor stock picks. Among these, the top three stocks are Broadcom Inc. (NASDAQ:AVGO), NVIDIA Corporation (NASDAQ:NVDA), and Texas Instruments Incorporated (NASDAQ:TXN).
Goldman Sachs Semiconductor Stocks: Top 12 Picks
A closeup of a computer server rack surrounded by a CAT5 network of cables.
Our Methodology
To compile our list of Goldman Sachs' top semiconductor stocks, we selected the top chip stocks in its Q2 2023 investment portfolio.
Lam Research Corporation (NASDAQ:LRCX) is a backend chip company that sells chip making products. Despite a slow semiconductor industry, the firm has beaten analyst EPS estimates in all four of its latest quarters and the stock is rated Buy on average.
69 out of the 910 hedge funds part of Insider Monkey's Q2 2023 database had bought the firm's shares. Lam Research Corporation (NASDAQ:LRCX)'s biggest investor among these is Ken Fisher's Fisher Asset Management courtesy of its $1.8 billion stake.
Along with NVIDIA Corporation (NASDAQ:NVDA), Broadcom Inc. (NASDAQ:AVGO), and Texas Instruments Incorporated (NASDAQ:TXN), Lam Research Corporation (NASDAQ:LRCX) is a top Goldman Sachs semiconductor stock pick.
QUALCOMM Incorporated (NASDAQ:QCOM) is one of the biggest chip companies in the world. Its modems and processors are used in the bulk of Android gadgets and smartphones sold worldwide. These days, QUALCOMM Incorporated (NASDAQ:QCOM) is busy upgrading its products for AI support, and it has announced a new processor platform capable of bringing AI capability to smartphones.
Insider Monkey took a look at 910 hedge fund portfolios for this year's second quarter and discovered that 73 were QUALCOMM Incorporated (NASDAQ:QCOM)'s investors. Israel Englander's Millennium Management is the firm's largest hedge fund shareholder, owning 2.2 million shares that are worth $270 million.
ASML Holding N.V. (NASDAQ:ASML) is one of the most important companies in the chip industry since it is the only one capable of making high end chip manufacturing machines. Its machines are also at the center of global political tensions due to American sanctions on Chinese chip making, and some believe that exports to China soared in October due to potential new sanctions in the pipeline.
As of June 2023 end, 55 out of the 910 hedge funds profiled by Insider Monkey had held a stake in the company. ASML Holding N.V. (NASDAQ:ASML)'s biggest hedge fund investor is Ken Fisher's Fisher Asset Management as it owns a $3.4 billion stake.
9. International Business Machines Corporation (NYSE:IBM)
Goldman Sachs' Q2 2023 Investment: $632 million
When it comes to semiconductor research, International Business Machines Corporation (NYSE:IBM) sits at the top of the food chain and has developed innovative new technologies such as transistor designs for 2-nanometer products. Its shares are rated Buy on average and analysts have set an average share price target of $148.
By the end of this year's June quarter, 51 among the 910 hedge funds tracked by Insider Monkey had bought and invested in International Business Machines Corporation (NYSE:IBM)'s shares. Out of these, the largest shareholder is Peter Rathjens, Bruce Clarke, and John Campbell's Arrowstreet Capital as it owns $263 million worth of shares.
Advanced Micro Devices, Inc. (NASDAQ:AMD) is an American semiconductor designer that sells GPUs and CPUs. Its stock soared after its recent third quarter earnings, as CEO Dr. Lisa Su shared that AMD's AI chip, MI300, should bring in at least $1 billion in sales.
During Q2 2023, 112 out of the 910 hedge funds surveyed by Insider Monkey had bought the firm's shares. Advanced Micro Devices, Inc. (NASDAQ:AMD)'s biggest investor among these is Ken Fisher's Fisher Asset Management courtesy of its $3 billion investment.
Intel Corporation (NASDAQ:INTC) is the biggest chip manufacturing company in the world. The firm's troubles with chip production and its loss of technological edge have not helped the stock as analysts have rated it Hold on average and priced in a small $4 upside based on the average share price target.
Insider Monkey dug through 910 hedge fund holdings for this year's second quarter and found that 71 were Intel Corporation (NASDAQ:INTC) shareholders. Israel Englander's Millennium Management owns the largest stake among these, which is worth $370 million and comes via 11 million shares.
6. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Goldman Sachs' Q2 2023 Investment: $859 million
The Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is the world's leading contract chip manufacturer. As a result, its high end chip making plants are highly coveted by several governments, and lately, TSMC has faced troubles setting up new chip facilities in its home region of Taiwan - creating speculation of a renewed global push outwards from Taiwan.
As of Q2 2023 end, 121 out of the 910 hedge funds part of Insider Monkey's database had invested in the company. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)'s biggest investor is Ken Fisher's Fisher Asset Management due to its $2.3 billion stake.
Broadcom Inc. (NASDAQ:AVGO), Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM), NVIDIA Corporation (NASDAQ:NVDA), and Texas Instruments Incorporated (NASDAQ:TXN) are some top Goldman Sachs semiconductor stocks.
