Which Semiconductor Stock Could Be The AMD Of 2020?

Advanced Micro Devices (NASDAQ:AMD) has been one of the top performers so far in 2019. The stock returned a whopping 139.2% on a year-to-date basis compared with the industry, Nasdaq and S&P 500’s rally of 45.7%, 33.8% and 27.2%, respectively.

The outperformance can be attributed to robust adoption of the company’s EPYC and Ryzen desktop and mobile processors. This helped AMD withstand sluggishness and volatility in the semiconductor market amid headwinds pertaining to the U.S.-China trade war and related tariffs.

Additionally, robust demand of AMD’s GPUs especially Radeon processors has been a key catalyst. Strength in GPU ASP, primarily driven by higher datacenter GPU volume, drove the top line, which increased 9% year over year to $1.80 billion in third-quarter fiscal 2019.

Moreover, notable customer wins on the back of its high-performance portfolio of processors and continued innovation in high performance computing (HPC) ecosystem has been a major growth driver.

Notably, this Zacks Rank #3 (Hold) stock delivered positive earnings surprise of 2.2% in three of the trailing four quarters.

What Awaits Semiconductor Stocks in 2020?

An improving semiconductor market and partial respite from the U.S.-China trade war are expected to help semiconductor stocks in 2020.

Notably, the broader iShares PHLX Semiconductor ETF (SOXX) is up 60.2% year to date and has surged more than 30% over the past six months.

Markedly, semiconductor sales improved sequentially in August, September and October, indicating a recovery in the chip market. Per World Semiconductor Trade Statistics, global semiconductor sales are expected to increase 5.9% in 2020 against an estimated decline of 12.8% in 2019.

Robust demand for memory chips and other semiconductor solutions, on account of rapid adoption of cloud computing, AI, IoT, autonomous cars, advanced driver assisted systems, gaming, wearables, drones and VR/AR devices, is a major growth driver.

Additionally, excess NAND and DRAM inventory, which limited growth for the most part of 2019, is expected to normalize, thereby improving ASP.

The accelerated deployment of 5G technology — the next-generation wireless revolution — is also likely to spur growth.

Here, we have picked four semiconductor stocks which are expected to benefit from the aforementioned factors.

Moreover, these stocks carry a Zacks Rank #1 (Strong Buy) or 2 (Buy) which make them better investment options. You can see the complete list of today’s Zacks #1 Rank stocks here.

Further, these four stocks have outperformed the S&P 500 on a year-to-date basis.

Year To Date Performance

Our Picks

Headquartered in Austin, TX Cirrus Logic (NASDAQ:CRUS) has returned 144.2% on a year-to-date basis. The solid performance can be attributed to the company’s asset-light business model and portfolio strength.

Long-term expected earnings growth is pegged at 15% for this Zacks Rank #1 stock. Notably, the Zacks Consensus Estimate for 2020 earnings has increased 21.5% to $3.39 per share over the past 60 days.

Based in Greensboro, NC Qorvo (NASDAQ:QRVO) is another Zacks Rank #1 stock. The company is benefiting from increased demand for RF Fusion based solutions, antenna tuning, discrete components and BAW-based multiplexers. The stock has returned 92.1% on a year-to-date basis.

Qorvo’s long-term expected earnings growth is pegged at 11.9%. Notably, the Zacks Consensus Estimate for 2020 earnings has increased 11.8% to $5.69 per share over the past 60 days.

Based in Lowell, MA, MACOM Technology Solutions Holdings (NASDAQ:MTSI) is benefiting from diverse product portfolio and strong exposure to multiple end markets. The company is riding on solid momentum across industrial and defense markets. The stock has returned 84.6% on a year-to-date basis.

This Zacks Rank #2 stock has a positive long-term expected earnings growth of 15%. Notably, the consensus mark for 2020 earnings has increased 47.1% to 25 cents per share over the past 60 days.

Santa Clara, CA-based NVIDIA (NASDAQ:NVDA) is benefiting from strong growth in GeForce desktop and notebook GPUs, which is boosting gaming revenues. Solid momentum of its real-time ray tracing technology is also a positive. Increase in Hyperscale demand is a tailwind for the Data Center business as well. Growing adoption in the inference market is an upside too.

Moreover, the solid uptake of AI-based smart cockpit infotainment solutions is a boon. Further, strength across mobile workstation products is aiding Professional Visualization revenues. The stock has returned 79.3% on a year-to-date basis.

This Zacks Rank #2 (Buy) company has a long-term expected earnings growth rate of 10.3%. Notably, the consensus mark for 2020 earnings has increased 4.1% to $5.56 per share over the past 60 days.

Zacks Top 10 Stocks for 2020

In addition to the stocks discussed above, would you like to know about our 10 top tickers for the entirety of 2020?

These 10 are painstakingly hand-picked from over 4,000 companies covered by the Zacks Rank. They are our primary picks to buy and hold.

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