NVIDIA (NVDA) is under the microscope after the British authorities launched an investigation into its planned acquisition of ARM. Its shares also look overvalued at their current price level. So, we think it could be wise to instead bet on quality semiconductor stocks Broadcom (NASDAQ:AVGO), QUALCOMM (QCOM), and NXP Semiconductors (NASDAQ:NXPI) to cash in on the semiconductor industry’s growth. These names also have an A (Strong Buy) rating in our proprietary rating system. Let’s discuss.Artificial intelligence (AI) computing company NVIDIA Corporation (NASDAQ:NVDA) in Santa Clara, Calif., reported top-line and bottom-line growth for the fiscal second quarter, ended August 1, 2021. The company’s revenues increased 68% year-over-year to $6.51 billion in the quarter, while its non-GAAP net income came in at $2.62 billion, up 92% year-over-year. The stock has gained 132.8% in price year-to-date to close yesterday’s trading session at $302.03. However, it is currently trading 6% below its 52-week high of $323.10, which it hit on November 9, 2021.
In August 2021, the Competition and Markets Authority (CMA) launched an investigation into NVDA’s planned acquisition of U.K. technology company ARM on national and competition concerns. Furthermore, yesterday, Nadine Dorries, Britain’s Secretary of State for Digital, Culture, Media and Sport, ordered an in-depth Phase Two probe of the proposed acquisition. The stock is also trading at an expensive valuation. In terms of forward EV/S and P/S, NVDA’s 29.17x and 29.08x, respectively, are higher than the 4.31x and 4.29x industry averages. So, we think it could be wise to wait for a better entry point in the stock.
As the world’s demand for consumer electronics and automobiles increases, the demand for semiconductors is also expected to continue growing. According to a report by PWC, the market for AI-related semiconductors is expected to grow from a current $6 billion to more than $30 billion by 2022. So, instead of betting on NVDA, we think it could be wise to bet on shares of quality semiconductor companies Broadcom Inc. (AVGO), QUALCOMM Incorporated (NASDAQ:QCOM), and NXP Semiconductors N.V. (NXPI) because they’re well-positioned to capitalize on the industry tailwinds. These stocks are rated A (Strong Buy) in our proprietary POWR Ratings system.