Semiconductor Stocks Saw 100%+ Gains Over the Last Year
The semiconductor market reported an ever-increasing demand over the past year, mainly driven by a rise in the application of computer chips. However, due to the de-globalization of supply chains and disruption in production lines, both stemming from Covid lockdowns, a global shortage of chips emanated.
Nevertheless, the stocks of top semiconductor companies have exploited the state of affairs and gained more than 100% in the last 12 months. While there is no doubt that semiconductors will remain high in demand, one thing is still not for sure: will the semiconductor stocks continue to surge?
Stocks of Top Semiconductor Companies Soar
A total of five semiconductor stocks have raised by more than 100% on average in the last 12 months. Moreover, on average, the top ten semiconductor stocks have gained more than 78%, showcasing that the entire semiconductor market experienced serious gains over the course of the last year.
Among these companies, NVIDIA Corporation has gained the most, growing by more than 107%. Right behind NVIDIA comes Taiwan Semiconductor Manufacturing Company Limited, growing by more than 106% — merely 1% less than NVIDIA. Lattice Semiconductor Corporation is the last company on the list that has reported a return of more than 100%, growing by nearly 103%.
NVIDIA stock, which has garnered the most gains, is currently trading at around $790. Comparatively, NVIDIA has outperformed 99% of all other stocks. Last month alone, NVIDIA stock gained more than 20%, as it rose from $648 on May 28 to its current price of $790.
The Extent of Semiconductor Shortage
The effect of Covid has reached nearly everything, from the USD via inflation-spurred stimulus packages, to supply chains nearly everywhere. The current shortage of semiconductors began during the second quarter of 2020. At that time, chipmakers heeded a substantial demand for semiconductors to be utilized within remote healthcare, work-at-home, and virtual learning types of equipment.
With each passing day, the semiconductor shortage continued to exacerbate as various industries like automobiles, personal computers, smartphones, and even home appliances manufacturers lacked chips. As a result of this shortage, the prices of semiconductors increased anywhere between 10 to 30 percent.
Moreover, the chip shortage has also affected the price of its downstream market — the consumer electronics sector, personal computers, smartphones, and home appliances. These sectors saw price adjustments since the beginning of this year. The PC industry, for instance, saw price hikes by around 6%.
Liu Jun, president of Lenovo‘s China branch stated:
“The PC industry is expected to witness price increases throughout the whole year.”
Some global manufacturers have decided to cut short their production due to the shortage of semiconductors. For example, the leading automaker company Ford has announced that it will cut its second-quarter 2021 production by around 50%. Numerous other automotive companies have also informed of similar cuts.
Will Semiconductor Stocks Continue to Surge?
While various factors play a role in the activity of all stocks, the most notable reason is the semiconductor industry’s extensive role in the technology sector. The lockdown forced fintech companies to further innovate and proceed toward digitalization, and as they forged ahead, the need for semiconductors increased.
Major sectors that require a massive supply of semiconductors include electric vehicles, aerospace & defense, off-highway equipment, consumer electronics, automobiles, smartphones, the PC industry, and even home appliances. Moreover, the global shift towards the 5G network is also considerably impactful, as top countries are putting all their capacity to lead the 5G race.
In addition, numerous technology analysts have predicted that the semiconductor shortage will continue for most of 2021, and it could even extend to much of 2022 as well. This is because there is no easy solution to the semiconductor shortage. New semiconductor manufacturing plants require a big budget and take a long time to build, and the current suppliers can’t satisfy the ever-increasing demand.
There is no doubt that semiconductors will remain high in demand in the coming years. Further, the semiconductor stocks seem to reflect a cyclical nature — i.e., the stock’s performance surges as the demand increases, and drops as demand plunges.
Bearing all these in mind, we can argue that even when the supply chain gets restored and the semiconductors prices cool off, the industry might still keep rising.
Do you think semiconductor companies’ stocks are now a good investment? Let us know in the comments below.