The Zacks Analyst Blog Highlights: NVIDIA, Photronics And NXP Semiconductors
Zacks Investment Research | Jan 02, 2020 08:24PM ET
For Immediate Release
Chicago, IL – January 2, 2020 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include:NVIDIA Corporation (NASDAQ:NVDA) , Photronics, Inc. (NASDAQ:PLAB) and NXP Semiconductors N.V. (NASDAQ:NXPI) .
Here are highlights from Thursday’s Analyst Blog:
4 Chip Stocks to Gain from China's Reliance on U.S. Tech
Chip stocks witnessed a strong rally in 2019, largely driven by investors’ optimism over a U.S.-China trade deal. This is because these companies have considerable exposure to the world’s biggest chip market — China.
In addition, developments in the semiconductor industry last year brought the significance of U.S. chip-enabled products to the forefront for many crucial Chinese tech products and supply chains.
These developments coupled with an improving U.S.-China trade ties are bound to drive the semiconductor industry.
American Chip Design Tech is Paramount for China: Here’s Why
A major factor driving the importance of U.S. technology for China is the country’s reliance on specific American technologies for its supply chains.
To look at this arrangement closely, one may note that the development of these supply chains requires tools that produce the hardware and software that design the integrated circuits that essentially make computer chips function. Therefore, the functionality of China’s entire technology-intensive supply chains comes down to the operations in the American chip design tools industry.
It is imperative to consider the significance of global semiconductor firms, and more specifically, American chipmakers here. This is because the chip design tools industry is dominated by just four U.S.-based companies, namely, Synopsys (NASDAQ:SNPS), Cadence Design (NASDAQ:CDNS) Systems, ANSYS and Mentor Graphics. These four companies control 90% of the world market (as of 2018), according to S2C data.
Semiconductor Stocks at the Forefront
This dependence on prominent U.S. chipmakers naturally brings semiconductor stocks to investors’ watch list. Since chipmakers comprise the majority of top U.S. companies with revenue exposure to China, these are most sensitive to the upcoming U.S.-China trade agreement.
The much-awaited phase-one U.S.-China trade agreement is set to be signed on Jan 15, which promises to de-escalate the tariff war. The deal is also expected to protect U.S. intellectual property and drive penetration of U.S. companies into the fast-growing Chinese markets.
According to Evercore ISI, China accounted for 35% of global semiconductor sales in 2018. Therefore, with de-escalation in the U.S.-China trade war, one can anticipate a possible rally in semiconductor stocks in the near future as demand for chip-enabled products gain traction in both the countries.
Second, semiconductors form an integral part of almost every crucial, in-demand tech product at present. These chip-enabled products infiltrate everything, including those under the tariff fire right now. The upcoming U.S.-China trade deal is likely to help in that aspect as well.
4 Chip Stocks to Buy in 2020
We have chosen four semiconductor stocks that are well positioned to gain this year from the aforementioned factors. All of these stocks carry a Zacks Rank #1 (Strong Buy) or 2 (Buy).
Synopsys, Inc. is a provider of electronic design automation software products that are used to design and test integrated circuits. The company has a prominent market share (36.5%) in the $8.5-billion chip design tools industry, according to S2C.
Synopsys’ core competency is its electronic design automation tools (EDA) that help design chips and the systems that create these chips. The company’s EDA tools make up for 60% of its revenues. From initial design to verification, Synopsys’ EDA software serves hardware designers.
The Zacks Consensus Estimate for Synopsys’ current-year earnings has moved 4.6% north over the past 60 days. Shares of this Zacks Rank #1 company have risen 71.6%, outperforming the Zacks Original post
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