The VanEck Vectors Semiconductor ETF (SMH) is up 45% year-to-date and was seen flirting with all-time highs when the closing bell rang on the December 27 trading session.
It might be hard to duplicate that performance in 2022, but that doesn’t mean that investors should gloss over chip stocks and exchange traded funds like SMH. Experts believe that supply chain woes will abate next year, enabling semiconductor producers to finally deliver supply to anxious customers. That doesn’t mean that supplies will be abundant or that sales growth will be tepid.
Wells Fargo and Evercore forecast chip sales growth of 8% to 13% next year. With that in mind, some of SMH’s marquee components remain beloved by sell-side analysts.
“JPMorgan believes that Nvidia will continue to benefit from three key multi-year growth drivers: PC gaming, data centers/computing and autonomous driving. The bank noted that the company has consistently delivered strong growth across gaming and data centers/computing and will continue to see ‘outsized growth and clear leadership’ in the two segments over the next few years,” reports Zavier Ong for CNBC.
Nvidia, one of the dominant names in chips for data centers, gaming, cryptocurrency mining, and other pursuits, is SMH’s largest holding at a weight of 14.9%. Wells Fargo praises Nvidia’s exposure to the nascent metaverse.
“We see Omniverse as a key enabler/platform for the development of the metaverse across a wide range of vertical applications,” according to the bank.
Speaking of Wells Fargo, that bank and Goldman Sachs are constructive on DRAM giant Micron (NASDAQ:MU) heading into 2022. Micron, a top 10 holding in SMH, is a Wells Fargo top chip pick for 2022.
The bank sees Micron “as a leader in automotive dynamic random-access memory (DRAM) — an integrated circuit chip widely used in digital electronics. The bank noted that the company has been reporting strong sales growth to the automotive market, a segment where the company has a market share of around 50%,” according to CNBC.
Among the other chip stocks Wall Street is bullish on heading into 2022 are Broadcom (NASDAQ:AVGO) and Marvell Technology (NASDAQ:MRVL). That duo combines for more than 9% of SMH’s roster.
JPMorgan sees Marvell notching “above-industry average compounded growth of 15-20% over the next several years — driven by its portfolio diversification and expanding pipeline in storage, networking and application-specific integrated circuits,” notes CNBC.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.