Welcome to Episode #421 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds, and ETFs and how it impacts your life.
This week, Tracey is going solo to discuss the semiconductor stocks. Should you buy the semiconductor stocks right now or is it too late to get in?
Semiconductors: Too Hot to Handle?
The semiconductor stocks, which includes more than just the chips, have been on a tear the last 18 months. Over the summer, the stocks took a break and fell back. But some, like NVIDIA, are now back at all-time highs.
This earnings season may push them even higher.
Tracey looked at 5 of the biggest names in the industry.
Are they too expensive to buy right now or is the growth just so strong you MUST own them?
1. NVIDIA Corp. (NVDA)
NVIDIA has been a top stock all year. Shares of NVIDIA are up 184.2% year-to-date, easily outperforming the S&P 500 which is up 23%. But it's been rocky the past 3 months, with big sell-offs. However, thanks to a surge in October, NVIDIA shares are up 15% over that time while the S&P 500 is up just 4.2%.
Earnings look spectacular. Earnings are expected to rise 116% in fiscal 2025 and another 32.8% in fiscal 2026.
While NVIDIA may seem expensive with a forward P/E of 48, it has a PEG ratio of just 1.16. A PEG under 1.0 indicates a company has both value and growth. NVIDIA's PEG is nearly that low.
Advanced Micro Devices has lagged in 2024. While shares of Advanced Micro Devices are up 48.6% over the last year, year-to-date they're up just 12.8%. Over the last 3 months, Advanced Micro Devices is down 4.9% while the S&P 500 is up 4.2%.
Earnings are expected to jump 26.8% in 2024 and another 54.6% in 2025. You won't get Advanced Micro Devices cheaply, though. It trades with a forward P/E of 46. However, it's PEG ratio is just 1.6, which is low.
Is this a buying opportunity in Advanced Micro Devices?
3. Broadcom Inc. (AVGO)
Broadcom shares have been testing new all-time highs again in 2024. Broadcom is up 67.3% year-to-date, outperforming the S&P 500 which is up 23.3%. Over the last 3 months, it is outperforming as well, up 13.4% compared to 4.2% for the S&P 500.
Earnings are expected to rise 14% in fiscal 2024 and another 27% in fiscal 2025. Broadcom's P/E is a little more reasonable, at 36.7x. It has a PEG ratio of 2.2, however. That's higher than NVIDIA and Advanced Micro Devices.
Lam Research is the only one of these 5 stocks that is underperforming the S&P 500 year-to-date. Shares of Lam Research are down 2.4% year-to-date. Over the last 3 months, the performance has been dismal. Shares are down 26.7% during that time.
Yet earnings are expected to rise 8.7% in fiscal 2025 and another 32.6% in fiscal 2026. Lam Research has attractive valuations with a forward P/E of just 22.8 and a PEG ratio of 1.69.
Is this share weakness a buying opportunity in Lam Research?
5. Taiwan Semiconductor Manufacturing Co. Ltd. (TSM)
Taiwan Semiconductor just reported earnings and beat again. It also sees strong demand for AI chips for the next several years.
Shares of Taiwan Semiconductor have spiked on the earnings news and are up 19.1% over the last 3 months. However, they have been on the move higher all year and are now up 102.7% year-to-date.
Earnings are expected to rise 24.5% in 2024 and another 28.4% in 2025. Remarkably, the stock is still cheap even with the huge move higher in the shares. Taiwan Semiconductor trades with a forward P/E of 29.1 but a PEG of just 1.1.
Should Taiwan Semiconductor be on your short list?
What else do you need to know about the semiconductor stocks?
Tune into this week's video podcast to find out.
[In full disclosure, Tracey owns shares of AVGO in Zacks Insider Trader portfolio.]
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Advanced Micro Devices, Inc. (AMD) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Lam Research Corporation (LRCX) : Free Stock Analysis Report
Broadcom Inc. (AVGO) : Free Stock Analysis Report