By Ian Bezek, Investor Place, Trades Of The Day, 2024-06-27
Semiconductor stocks are delivering record performance as of late. Key technological breakthroughs in fields such as artificial intelligence have caused a gold rush atmosphere across the chip stock space.
However, not all chip stocks have profited equally from these developments. In fact, quite a few semiconductor stocks are down so far in 2024. The chip industry is large, and many companies serve fields such as industrial, automotive or consumer electronics that are not enjoying the same demand tailwinds as AI-enabled chips.
Additionally, while investors gravitate to large-capitalization tech stocks, some smaller companies are flying under the radar. These factors have created real buying opportunities in these three semiconductor stocks to buy on the dip today.
Intel (INTC)
There have been many obituaries written for Intel (NASDAQ:INTC) recently. According to the company's critics, management has lost its way, and the company is light years behind rivals like Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD).
The past returns are certainly brutal. INTC stock has fallen 35% over the past five years, whereas the Vaneck Semiconductor ETF (NASDAQ:SMH) has soared nearly 400% over the same time frame. Intel missed the AI boom while ceding ground in its core computing chip market.
So, lights out for Intel? Not so fast. While the company certainly had its missteps, it has several opportunities to return to the game. For one thing, Intel spends more than $16 billion annually on research and development, meaning it's never more than one or two product cycles away from regaining tech superiority against key rivals.
Intel is also investing heavily in the future. It has a massive array of construction projects underway, including a $32 billion modernization push for its Arizona facilities and $28 billion for new fabs in Ohio. These investments are getting healthy support from the Biden Administration's CHIPs Act, which provides financial assistance for domestic chip manufacturing facilities.
These factors make it likely that Intel will be able to pull out of its recent slump. And INTC stock is certainly priced with a favorable risk/reward profile for when these investments start to pay off.
GlobalFoundries (GFS)
GlobalFoundries (NASDAQ:GFS) is a large semiconductor foundry operator. The company serves a wide range of customers worldwide and generates around $7 billion in annual revenues.
Investors perceive Taiwan Semiconductor Manufacturing Company (NYSE:TSM) as the dominant foundry space player. Indeed, TSM has about 60% market share. But given the size of the overall market and its rapid growth, that leaves plenty of space for the #3 largest player, GlobalFoundries.
Indeed, GlobalFoundries is investing for growth. The semiconductor firm is developing its new state-of-the-art plant in Saratoga Springs, New York. Given the geopolitical risk in that jurisdiction, this should prove profitable as clients want to diversify their supply chains and reduce sourcing risk from Taiwan.
Despite the boom in the semiconductor industry, GFS stock has gone down 15% over the past 12 months. It is exposed to cyclical industries, such as automobiles, that are currently in a slump. But with high short interest, GFS stock is set to come roaring back once sentiment picks up.
Photronics (PLAB)
Photronics (NASDAQ:PLAB) is a smaller semiconductor stock to buy on the dip now. Trading at less than 12 times forward earnings, Photronics is a cash cow within the chips industry.
More specifically, Photronics makes photomasks. These opaque plates with special characteristics allow light to pass with a specific pattern. Photomasks are integral in photolithography and enable semiconductor companies to produce the latest and greatest integrated circuit designs in increasingly compact designs.
Phototronics offers a unique way to benefit from current industry conditions. The world is building redundant semiconductor foundry capacity to diversify risk away from China and Taiwan. The company also highlights AI and Internet of Things (IOT) applications as being key drivers for future photomask demand growth.
While PLAB stock has tripled over the past five years, shares are currently down about 20% year-to-date. This dip gives investors a great entry point on Photronics stock.
— Ian Bezek
Source: Investor Place
The post 3 Semiconductor Stocks to Buy on the Dip appeared first on Trades Of The Day.
