Despite the heightened uncertainty now, one thing is crystal clear: The stock market downturn won’t last forever.technology-centric NASDAQ-100 The index has fallen below the 20% threshold that technically defines a bear market, at one point falling more than 31% from its all-time high. But as the end of the month approaches, the losses have shrunk by a few percentage points, as rates may not rise as initially expected, as some early evidence inflation is slowing.
While the potential for a turnaround has begun, there are still opportunities for patient long-term investors to pick up quality stocks at deep discounts. The semiconductor industry can be a good place to watch. Producers could get a slice of the $1 trillion annual pie over the next decade due to the huge demand for advanced computer chips due to the increasing digitization of consumer products.
As the broader market begins to recover, here are two semiconductor stocks to buy.
1. MKS Instruments
MKS Instruments (MKSI 0.08%) It doesn’t make computer chips itself, but instead provides products and services to the world’s largest manufacturers. In fact, the company says that nearly every semiconductor produced globally is made with MKS products. But with a 60-year history, MKS also has a strong presence in other industries such as defense, life sciences and industrial technology.
In semiconductors, the company helps producers save costs and increase yields by reducing waste and improving processes. Its suite of tools is designed to meet new-age challenges facing chipmakers as semiconductors continue to shrink in size and become more mobile, but need to be more powerful. MKS covers every process stage from silicon wafer production to ion implantation to finished product inspection equipment to ensure manufacturers achieve the highest level of output.
Like most chip companies, MKS has been through a pandemic period. Supply is running short due to the lockdown, but demand continues to soar as the digitalisation of consumer goods continues to expand into new markets such as electric vehicles. Despite a very strong first quarter of 2021, the company managed to grow revenue a further 7% to $742 million in the most recent first quarter of 2022, and it would have fared better had it not been for short-term supply chain disruptions.
But profitability is where MKS really shines.The company’s trailing 12-month EPS of $11.54 puts its stock in the P/E ratio Only 10.5.This is 50% off Anshuo Semiconductor ETFwhich trades at a ratio of 21.4, meaning MKS shares would have to double to stay in line with industry peers.
It can be beneficial to have companies with strong earnings in volatile markets, as they are less likely to need capital injections. In the case of MKS, it also offers a quarterly dividend of $0.22 per share, which means you get paid to own it.
2. Advanced Micro Devices
to that moment semiconductor giant, Advanced Micro Devices (AMD -0.25%) conforms to the description of T. It’s a household name thanks to its popular computer gaming chips, and the company’s hardware now also powers two of the world’s leading console platforms — MicrosoftXbox and sonyPlayStation 5.
AMD’s strength as a company stems from its diversity.The company also Tesla Provides chips for infotainment systems in the company’s electric vehicle suite. They’re more powerful than the typical systems of most internal-combustion-powered cars; in addition to controlling most onboard functions, Tesla owners can play games, access apps, and even browse the internet.
AMD also has a strong presence in the data center space, leading the world’s major cloud service providers such as Amazon, lettergoogle, and Alibaba. This drove AMD’s enterprise, embedded and semi-custom segment revenue up as much as 88% to $2.5 billion in the first quarter of 2022.
The company has incredible growth opportunities thanks to the acquisition of Xilinx, the global leader in adaptive computing. This advanced technology allows computer chips to adjust in real-time to suit the needs of users, a huge leap from typical hardware that needs to be replaced to suit different applications. AMD sees this as the next frontier in high-performance computing.
Over the trailing 12 months, AMD generated $18.8 billion in revenue and $3.41 in EPS; it’s a financial powerhouse. Its revenue growth in the first quarter of 2022 was 71% year-over-year, a slight slowdown from 93% in the same period last year, but the underlying numbers are now much larger, which will make comparable numbers harder to beat going forward. This is a natural characteristic of any rapidly growing business.
AMD shares fell 37% amid a broader tech sell-off, but given its financial performance, this could be a great opportunity for investors to consider taking a position.