In This Article:
The semiconductor market, which started rebounding earlier last year, carried the momentum and ended 2024 on a high. Semiconductor sales made a solid jump in 2024, with the final quarter proving to be one of the best.
The jump in sales witnessed over the past few quarters is being powered by robust enthusiasm surrounding artificial intelligence (AI), especially generative AI. Last month, semiconductor stocks, particularly those involved in AI, suffered after the launch of DeepSeek, a low-cost AI model from China. DeepSeek’s rise raised concerns of an imminent threat to the dominance of U.S. tech companies in the AI space. However, those concerns soon faded, and optimism began to return.
Given this scenario, it would be ideal to invest in semiconductor stocks such as NVIDIA Corporation NVDA, Taiwan Semiconductor Manufacturing Company Limited TSM and RF Industries, Ltd. RFIL. Each of these stocks carries a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Semiconductor Sales Jump in 2024
The Semiconductor Industry Association (SIA) said recently that global semiconductor sales totaled $627.6 billion in 2024, up 19.1% from last year’s total of $526.8 billion. Sales also jumped a solid 17.1% year over year in the fourth quarter of 2024, totaling $170.9 billion, and up 3% sequentially.
The announcement from SIA comes just days after a separate report from Gartner showed global semiconductor sales hit $626 billion in 2024, up 18.1% year over year. The report also projected semiconductor sales to hit $705 billion this year.
High demand for semiconductors at data centers has been boosting sales. Also, the memory market played a key role in driving semiconductor sales in 2024, with revenues skyrocketing by 71.8% compared to the previous year.
Semiconductor Market Poised to Grow
A large number of technology companies have been heavily investing in AI and its development. Businesses that have deeply incorporated AI into their products have seen significant expansion in recent years.
Last month, Chinese startup DeepSeek shook up the U.S. AI space by introducing a free, open-source assistant that it claims operates with lower-cost chips and requires less data. The company said that developing the AI model cost under $6 million, raising doubts about the assumption that AI would drive strong demand throughout the supply chain, from semiconductor manufacturers to data centers.
As a result, tech and semiconductor stocks suffered a sharp decline. However, concerns quickly eased as analysts suggested that the Chinese model was overestimated.