Before considering which semiconductor stocks to buy during the dip, it’s important to understand why semiconductor stocks have been falling since the beginning of July. Let’s look at three intertwined reasons.
First, recession fears have resurfaced: the latest employment report shows the labor market is tightening, and July inflation figures are due to be released the week of August 12. Global markets are beginning to believe that the U.S. Federal Reserve may not be able to cut interest rates fast enough to prevent a recession.
Geopolitical concerns are also weighing on investors’ minds: the outcome of the November election is likely to have a significant impact on U.S. relations with China and Taiwan, which could put further pressure on inventory levels.
This means investors are starting to sell off some of their winners to save cash or switch to other stocks.artificial intelligence) trading, semiconductor stocks are some of the biggest winners in 2024.
But when will the selloff become too much? Every investor must answer that for themselves. But for a variety of reasons, the following three companies look like attractive semiconductor stocks to buy on the dip.
NVIDIA (NVDA)
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NVIDIA (NASDAQ:NVDA) stock is up 111% in 2024. It is also down 22% in the 30 days ending August 9, 2024. Just because the first statement is true doesn’t mean the second statement isn’t true. NVIDIA’s stock price is down a lot, but is that a reason to buy semiconductor stocks on the dip?
Critics will point out that NVIDIA has announced delays in chip production. The company may also stop making its popular and inexpensive GeForce RTX 3060 chips. The production delays are being blamed on Advanced Micro Devices (NASDAQ:Am) is eager to grab market share. Apple (NASDAQ:AAPL) and Meta Platforms (NASDAQ:Meta) is actively looking for alternatives to NVIDIA chips.
But that assumes competitors have enough chips ready to grab that share, and it also assumes the economy will remain strong enough that the amounts companies say they intend to spend on AI infrastructure will match what they actually spend.
This could impact NVIDIA as well as other companies, but the company and NVDA stock are well-positioned to overcome the short-term impact.
ARM Holdings (ARM)
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ARM Holdings (NASDAQ:arm) is nearing its IPO. And it’s been quite a year. The stock is up 55% since its IPO (Initial public offering), but has fallen more than 32% in the last month. A strong first-quarter fiscal 2025 earnings report may have blunted the selling pressure, but ARM shares aren’t rallying.
To understand why this is the case, it’s important to understand ARM’s role in chip manufacturing. Specifically, ARM does not manufacture its own chips. Rather, ARM is a chip and software designer, collecting license fees and royalties on its architecture and intellectual property. (See:IP address).
The company provided cautious guidance in its most recent earnings call, meaning it maintained its current guidance. As we said at the start, that’s not what investors want to hear right now, especially if they’re willing to pay a premium for chip stocks. This may be why short selling of ARM shares has increased over the past 30 days.
Meanwhile, roughly 99% of premium smartphones are powered by ARM CPUs, which gives the company a solid foundation and should make the stock a good buy.
Applied Materials (AMAT)
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If there’s one undervalued semiconductor stock in 2024, it’s Applied Materials (NASDAQ:Amato) could be it. AMAT stock is up just 37% over the past 12 months and seems clearly undervalued compared to other semiconductor stocks. However, the stock is down more than 20% over the past month. This could represent one of the best opportunities to buy semiconductor stocks on a dip.
Like ARM, Applied Materials does not manufacture chips, but it does provide innovative materials and engineering solutions to chipmakers. In May 2023, Applied Materials announced its intention to build the Equipment and Process Innovation and Commercialization (EPIC) Center, which the company touts as “the world’s largest and most advanced facility for collaborative research and development (R&D) of semiconductor process technologies and manufacturing equipment.”
The project won’t be completed until 2026. However, the company will report earnings in mid-August, and a strong report should be just what the company needs to propel its stock higher, especially since AMAT shares appear to have found support around $193.09 as of the market close on August 12, 2024.
As of the date of publication, Chris Mulcock did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author in accordance with InvestorPlace.com’s publishing guidelines.
On the date of publication, the editor in charge did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
