Some of the top semiconductor stocks to buy were crushed for most of 2022. All thanks to fears of a global economic slowdown, slowing chip demand, sky-high inflation, restrictions on chip sales to China, fears of recession, and overall doom and gloom. Even a warning from Micron Technology (NASDAQ:MU) put a dent in the chip market, making computer sales fall.
As a result, the iShares Semiconductor ETF (NASDAQ:SOXX), an exchange-traded fund holding 30 hot semiconductor stocks, is down more than 33% this year as compared to a 30% drop on the tech-heavy NASDAQ. However, most of the bad news has been priced in. In fact, even Credit Suisse analysts believe semiconductor stocks have also fallen far enough to present a long-term opportunity.
Better, Warren Buffett’s Berkshire Hathaway (NYSE:BRK-B) just bought $4.1 billion worth of Taiwan Semiconductor (NYSE:TSM), which is notable. For one, it tells us that Buffett may believe the bottom may be in and that it’s time to be greedy. Two, the beaten-down industry holds value as a “forever opportunity.” With patience, these damaged semiconductor stocks to buy will come back strong. After all, semiconductors have become an irreplaceable part of our lives.
VanEck Semiconductor ETF (SMH)
With an expense ratio of 0.35%, the VanEck Semiconductor ETF (NASDAQ:SMH) tracks the performance of companies involved with semiconductor production and equipment. It includes the who’s who in the world of semiconductor stocks, such as Taiwan Semiconductor, Nvidia, Texas Instruments, Broadcom, Applied Materials, Qualcomm Inc., Intel, and dozens more. It also tracks the MVIS U.S. Listed Semiconductor 25 Index and has about $7 billion in net assets.
While the SMH ETF doesn’t appear technically attractive at the moment, give it time. There are still plenty of trends that point to a very rewarding future for semiconductors, including gaming, electric vehicles, autonomous vehicles, 5G technology, cloud-based solutions, etc. Plus, with the global semiconductor industry poised to become a trillion-dollar industry by 2030, investing in the latest pullback isn’t a bad move.
Advanced Micro Devices (AMD)
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It’s even tougher to avoid Advanced Micro Devices (NASDAQ:AMD). At $73.39, the semiconductor giant plummeted from about $160 to about $56 before recovering to $73.39. From here, I’d eventually like to see the AMD stock again challenge $100 shortly. Analysts believe it’s severely undervalued, as well. For example, Piper Sandler analyst Harsh Kumar has a price target of $90, with an overweight rating. He also says earnings appear to be bottoming and that PC inventory should start to clear out in the early part of 2023. In addition, he believes AMD is a great way to trade the server uptrend and cloud strength.
We also have to consider that its four divisions, including PCs, data centers, gaming consoles, and embedded (which consists of Xilinx’s embedded products), are all doing exceptionally well. In the company’s third quarter, revenues were up 29% year over year to $5.6 billion. Data center revenue was up 45% year over year to $1.6 billion. PC revenue was up 40% year over year to $1 billion. Gaming revenue soared 14% year over year to $1.6 billion. Embedded revenue was up 1,549% year over year to $1.3 billion. Those numbers alone make AMD look like a screaming buy heading into 2023.
ON Semiconductor (ON)
Unlike most other semiconductor stocks, ON Semiconductor (NASDAQ:ON) did well for most of 2022. In fact, after starting the year at $68.53, the stock is now up to $70.72. Sure, that’s nothing to write home about. But again, it’s far better than others in the sector.
Better, ON makes the semiconductors for the automotive, communications, computing, consumer, industrial, lighting, medical and military markets, where most need as many semiconductors as they can get their hands on. It’s also a smart bet on electric vehicles, which could be a massive catalyst moving forward.
“The company supplies automotive chips to some of the leading automakers and Tier 1 manufacturers in the world. We expect ON Semiconductor’s relationships with these leading automaker customers to benefit it as these manufacturers have announced their plans and targets for EV sales allowing the company to capitalize on the EV trend,”
as quoted on Seeking Alpha.
Earnings have been just as impressive, with the company’s adjusted Q3 earnings and revenue topping guidance. For the quarter, ON posted adjusted EPS of $1.45 on sales of $2.19 billion. Both were a beat. Unfortunately, guidance was lighter than expected. The company expects to post adjusted EPS of $1.18 to $1.34 on sales of $2.01 billion to $2.14 billion. Thus, ON is definitely one of the top semiconductor stocks to buy.
On the date of publication, Ian Cooper did not have (either directly or indirectly) any positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999.
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