Exploring the Profit Potential of 3 Chip Stocks in December

The chip industry is set for sustained growth in this digital era due to the heightened demand for advanced chips across diverse sectors. Expanding applications and the growing use of emerging technologies boost the industry’s prospects.

However, Wolfspeed, Inc. (WOLF – Get Rating) is best avoided in the industry due to its poor fundamentals and growth prospects. While it could be wise to wait for a better entry point in Texas Instruments Incorporated (TXN – Get Rating), ASE Technology Holding Co., Ltd. (ASX – Get Rating) is well-positioned to benefit from the favorable industry trends.

Before diving deeper into the fundamentals of these stocks, let’s understand the industry landscape.

Chips are in huge demand across consumer electronics, defense, automotive, telecommunications, data centers, and healthcare industries. Despite a slowdown last year, chip sales reached record highs, emphasizing their critical role in today’s diverse sectors.

In October, global semiconductor sales increased 3.9% sequentially, reaching $46.60 billion. The surge was fueled by the rising demand for advanced chips to power generative AI-based applications.

Gartner forecasts revenues from AI chips to increase 25.6% year-over-year to $67.10 billion in 2024. Moreover, AI chip revenue is expected to be more than double the market size in 2023, reaching $119.40 billion. This growth can be attributed to the demand for high-performance GPUs and optimized semiconductor devices for generative AI platforms.

On top of it, the semiconductor industry benefits from government policies, such as the CHIPS and Science Act, which allocated $53 billion for U.S. semiconductor industry development, including incentives for domestic chip manufacturing.

Investors’ interest in chip stocks is reflected in the VanEck Vectors Semiconductor ETF’s (SMH) 59.2% year-to-date return. The World Semiconductor Trade Statistics (WSTS) has projected that global semiconductor sales will rise 13.1% year-over-year to $588.40 billion in 2024.

Considering these trends, let’s analyze the fundamentals of the three…

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