How to Play the Chip Drought
The most obvious way to play the ongoing global chip shortage is to go long on chip manufacturers. Let’s take a look at the two largest chipmakers.
The Taiwanese Semiconductor Manufacturing Company (TSMC) and Samsung own 72% of the global foundry market. These companies have grown along with their fabless designer partners to meet the world’s seemingly unsatiable appetite for computing power. While these stocks are a good play, they have been on investors’ radars for almost a year and their potential may already be priced in. However, there are other interesting names in this segment.
Among them, NXP Semiconductors should definitely be on the watchlist. Although this stock has climbed almost 34% year to date, there is ample steam left. The company has projected robust growth for the rest of this year and into 2022. Analyst sentiment on average is also positive for the company.
Another stock to keep an eye on is STMicroelectronics, as this could also reap benefits from the electrification of automobiles. Market sentiment for both these stocks is overly positive, as reflected in the Acuity Trading Dashboard. However, sentiment for NXP Semiconductors is more positive, probably because of concerns around the high exposure STMicroelectronics has to a single client. Although this client is the largest company in the world, investors need to look out for Apple gradually bringing chip development in-house.