3 Semiconductor Stocks to Buy on Pullbacks

It always pays off to have a basic understanding of which sectors are strong in the market and which ones are showing weakness. For example, although the market sold off in a big way yesterday, certain sectors such as technology and semiconductors held up better than others. This has been a recurring theme throughout the pandemic, which tells us that those sectors have a relative strength in the market.

If you aren’t familiar with semiconductors, they are the materials that help to conduct electricity in the chips that power most of the technology in the world today. Semiconductors are found in products like videogame systems, smartphones, computers, and even medical devices. The demand for semis has never been higher, which is why it might be a good idea to consider buying stocks in the sector after the massive dip yesterday. Let’s take a look at 3 semiconductor stocks that are great businesses and worthy of a look, especially if the market provides even lower prices in the near future.

Broadcom (NASDAQ:AVGO)

One of the most undervalued semiconductor stocks in the sector has to be Broadcom. This is a company that is one of the world’s largest chipmakers and also possesses a solid infrastructure software business. Broadcom has been raking in revenue from its partnership with Apple, as the company produces the chips that power its infamous iPhones. The company also is benefitting directly from the shift to remote work as it gains more networking customers.

Once the 5G network officially goes online all over the world, you can expect the profits to continue rolling in for Broadcom. This is because of the advanced cellular chips that are needed to power phones and digital devices with 5G. Although the growth prospects aren’t as big as the other companies in this list, Broadcom stock is a safer bet with lower downside potential going forward. Add to that the fact that Broadcom has a strong dividend yield of 4.33% and you have a great looking stock that will help you gain exposure to the semiconductor industry.

Micron Technology (NASDAQ:MU)

Another strong company in the semiconductor space that isn’t getting enough love in the market is Micron Technology. The bull thesis here has to do with market trends like the increased demand for cloud computing and the growth of e-commerce. Additionally, Micron is uniquely positioned to help companies that are interested in Artificial Intelligence thanks to their flash memory product called DRAM. It will be fascinating to see the continued growth in these types of technologies, and Micron Technologies will be helping to power them.  

Micron is another stock that is poised to benefit greatly from the rollout of 5G technology. Businesses will likely need to update their infrastructure in order to get the most out of 5G devices, and Micron Technology can help with that. Their memory and storage products will be in high demand as 5G becomes the new normal. You also have to like the fact that Micron raised its Q3 forward revenue guidance to $5.2 billion. This is a company that seems to be undervalued relative to its peers and is poised for great things going forward.

NVIDIA (NASDAQ:NVDA)

Without a doubt one of the hottest stocks of the last few months, NVIDIA is worth a look based on their strong earnings growth, innovative products, and massive momentum. This is a stock that has risen roughly 15% over the last month and has been extremely hot since bouncing back off of the March lows. NVIDIA reported strong year-over-year revenue growth of 39% in its last earnings report and will likely continue rewarding investors over the long term.\

NVIDIA’s chips are universally revered by gamers, and it just so happens that the videogame industry continues growing rapidly which is great for the company’s shareholders. Their RTX GPU chips are considered to be some of the best computer gaming processors on the market. NVIDIA is also a solid choice thanks to its data center chips which help to power cloud infrastructure services for many large businesses. We know how quickly the cloud services sector is growing, which means the sky is the limit for NVIDIA’s high-powered graphics processors. Although NVIDIA is trading around its all-time highs, you can’t ignore the positive momentum and growth potential that the stock has to offer.

Semiconductor Strength

When you look at what these companies are doing to drive the growth of technology, you have to like their prospects going forward. Any of these stocks will provide exposure to a strong industry that is going to see massive growth in the coming years. Look to add any of these 3 great semiconductor stocks on pullbacks or short-term market weakness going forward.