Substantial government and private investments in the semiconductor space helped supply levels to improve slightly in May. And because this improvement trend is likely to continue, we think fundamentally sound semiconductor companies Applied Materials (NASDAQ:AMAT) and Himax (HIMX) should benefit significantly from growing demand. Conversely, the poor fundamentals and declining financials of Marvell (NASDAQ:MRVL) and Cree (NASDAQ:CREE) may not allow these names to capitalize on the industry headwinds. So, these two stocks are best avoided now. Read on for details.The increasing need for efficient tech products and solutions from several industries has fueled the growth of semiconductor sales. The global semiconductor industry generated $43.60 billion in sales in May 2021, up 26.2% year-over-year. Semiconductor sales, as reported by The Semiconductor Industry Association, on a three-month moving basis as of May were higher than any previous month in the market’s history, indicating improving semiconductor production.
Favorable government policies and private investments to address a global semiconductor shortage have helped the industry achieve this significant improvement in sales. The worldwide semiconductor market is expected to grow 19.7% in 2021 to hit $527 billion. As such, we believe fundamentally sound semiconductor stocks Applied Materials, Inc. (AMAT) and Himax Technologies Inc. (NASDAQ:HIMX) will be able to cash in on the improving supply conditions.
However, supplies have not yet caught up with the current demand levels. And because the global supply is expected to remain under pressure in the near term, we think fundamentally weak companies Marvell Technology Group Ltd . (MRVL) and Cree, Inc. (CREE) might struggle to stay afloat.