The semiconductor industry is showing a steady recovery due to a surge in demand for microchips. Over the past few months, global semiconductor sales have steadily grown as price pressures have eased.
The continued enthusiasm for artificial intelligence (AI) is also driving demand for semiconductors. The semiconductor industry is part of the broader technology sector and is expected to grow further as the Federal Reserve moves forward with further interest rate cuts.
Considering this situation, investing in semiconductor stocks such as Taiwan Semiconductor Manufacturing Co., Ltd. TSM, Semtech Corporation SMTC, and NVIDIA Corporation NVDA can be a wise decision.
Semiconductor sales continue to grow
The Semiconductor Industry Association (SIA) announced last week that global semiconductor sales in August totaled $53.1 billion, up 20.6% from $44 billion in the same period last year. On a month-on-month basis, semiconductor sales rose 3.5% from July’s total of $51.3 billion.
The year-over-year growth in semiconductor sales was the highest since April 2022, with sales in the Americas increasing 43.9% year-on-year.
“The global semiconductor market continued to see strong growth in August, with August sales reaching a record high and month-on-month sales increasing by “It has increased for consecutive months,” he said.
AI enthusiasm boosts semiconductor stocks with interest rate cuts
Easing price pressure is leading to a recovery in demand, and slowing inflation is supporting semiconductor sales. Additionally, this year’s technology rally has been largely driven by NVIDIA, which is playing a leading role in the generative AI space, spurring a surge in interest and development in the field.
Experts believe that AI has a lot of untapped potential and that the world still has much to explore. This growing enthusiasm is likely to further drive demand as more semiconductor manufacturers enter the AI space. The AI market is predicted to experience explosive growth in the near future, and the demand for AI chipsets is already increasing.
Additionally, the Federal Reserve began its easing cycle last month with the largest rate cut of 50 basis points since March 2020. The current benchmark policy rate is between 4.75% and 5%, the lowest level since April 2023.
The Fed’s latest dot plot also shows that the federal funds rate is expected to fall in the 4.25% to 4.5% range by year-end, with a 1 percentage point cut in 2025 and another 0.5 percentage point cut in 2026. This indicates that a reduction is expected. This results in a final interest rate range of 2.75% to 3%. Lower interest rates typically benefit growth assets because the opportunity cost of holding non-yielding assets, such as technology and semiconductor stocks, decreases.
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4 Semiconductor Stocks with Expected Growth
Taiwan Semiconductor Manufacturing Co., Ltd.
Taiwan Semiconductor Manufacturing Co., Ltd. is the world’s largest dedicated integrated circuit foundry. As a foundry, TSM manufactures ICs for customers based on proprietary IC designs using advanced manufacturing processes. Taiwan Semiconductor Manufacturing Co., Ltd.’s goal is to build on its strength as the world’s leading IC foundry and establish itself as one of the world’s leading semiconductor companies.
Taiwan Semiconductor Manufacturing Co., Ltd.’s expected profit growth rate for this fiscal year is 24.5%. The Zacks Consensus Estimate for current-year earnings has improved 1.7% over the past 60 days. TSM currently carries a Zacks Rank #2.
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Semtech Co., Ltd.
Semtech Corporation designs, manufactures, and markets a wide range of analog and mixed-signal semiconductors for commercial applications. SMTC’s product lines consist of signal integrity products, protection products, power and high reliability products, wireless and sensing products, and the systems innovation group.
Semtech’s expected profit growth rate for this fiscal year is over 100%. The Zacks Consensus Estimate for current-year earnings has improved 6.3% over the past 60 days. SMTC currently carries a Zacks Rank #3.
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NVIDIA Corporation
NVIDIA Corporation is a world leader in visual computing technology and the inventor of the graphics processing unit (GPU). Over the years, NVDA’s focus has evolved from PC graphics to AI-based solutions, and now supports high-performance computing, gaming, and virtual reality platforms.
NVIDIA Corporation’s expected earnings growth rate for the current fiscal year is over 100%. The Zacks Consensus Estimate for current-year earnings has improved 4.5% over the past 60 days. NVDA currently carries a Zacks Rank #3.
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