For Immediate Release
Chicago, IL – December 16, 2024 – Today, Zacks Investment Ideas feature highlights Marvell MRVL, Broadcom AVGO, Astera Labs ALAB, Advanced Micro Devices AMD and Semiconductor ETF SMH.
The Semiconductor Supercycle: 5 Reasons to Remain Bullish
AI Leaders Remain Bullish on the Future
I recently discussed the overwhelmingly bullish sentiment shared among top management teams in the semiconductor space, particularly regarding AI-related growth. Over the last handful of weeks, AI-centric growth stocks like Marvell, Broadcom and Astera Labs have seen their shares explode higher after blowing away Wall Street expectations. You can read the full commentary here.
However, as I mentioned in the piece, while industry-wide positive rhetoric can be a bullish omen for investors, these management teams must be taken with a grain of salt as insiders have “skin in the game” and benefit from higher stock prices. With that in mind, I will take the time to conduct a deeper analysis today to provide evidence for these comments and build up conviction for investors in the semiconductor trade into 2025. Below are five reasons to own semis, including:
1. Forward Estimates are Robust for Chip Stocks: An invaluable metric for investors to gauge is Zacks Consensus Estimates, which track a composite of Wall Street analyst estimates into the future. Marvell, which earns a best possible Zacks Rank #1 (Strong Buy), is expected to grow earnings by a juicy triple-digit clip next quarter.
2. Semiconductor Margins Are High: Compared to the general market, semis enjoy some of the highest margins on Wall Street, and in most cases, they are growing or remain steady.
3. Smart Money Sponsorship: According to the latest filings with the SEC, legendary billionaire investor David Tepper holds more than two million shares of Advanced Micro Devices. Meanwhile, Tepper isn’t the only deep-pocketed legend interested in chip stocks - fellow billionaire reportedly made a timely purchase of AVGO in his last filing.
4. Historical Seasonality: Historically, the turn of the new year is the optimal time to own the Semiconductor ETF. In addition, option traders have been tagging the semiconductor proxy with bullish call option flow.
5. Big Base Breakouts: Price is the ultimate arbiter of success and the most straightforward metric for investors. That’s a good sign for semiconductors. Several stocks in the industry like AVGO, ALAB, and MRVL, have triggered fundamentally driven, multi-month breakouts. Such moves typically mark the beginning of a new trend, not the end.
Conclusion
Semiconductor stocks are in the sweet spot between robust forward expectations, clean balance sheets, and fresh multi-month technical breakouts. The odds strongly favor higher prices in this leading industry.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
7 Best Stocks for the Next 30 Days
Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops."
Since 1988, the full list has beaten the market more than 2X over with an average gain of +24.1% per year. So be sure to give these hand picked 7 your immediate attention.
See them now >>Advanced Micro Devices, Inc. (AMD) : Free Stock Analysis Report
Broadcom Inc. (AVGO) : Free Stock Analysis Report
VanEck Semiconductor ETF (SMH): ETF Research Reports
Astera Labs, Inc. (ALAB) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
