Rising investments to address the global semiconductor chip shortage by ramping up production, and a continuing increase in demand for chips from several sectors, should drive the semiconductor industry’s growth. Therefore, we think it could be wise to scoop up shares of under-the-radar chip stocks Allegro MicroSystems (ALGM), MaxLinear (MXL), and Nova (NVMI). Read on.While the global chip shortage has been affecting the production of several industries since last year, global semiconductor sales have increased in the third quarter. According to the Semiconductor Industry Association (SIA), worldwide sales of semiconductors increased 27.6% year-over-year and 7.4% sequentially to $144.8 billion in the third quarter of 2021. Investors’ increased interest in the semiconductor industry is evident in SPDR S&P Semiconductor ETF’s (XSD) 22.7% gains over the past month versus the SPDR S&P 500 ETF’s (SPY) 7.5% returns over this period.
The demand for semiconductor chips is expected to continue growing due to the mainstream adoption of the internet of things (IoT), 5G, artificial intelligence (AI), and electric vehicles (EVs). In addition, most companies in this space are ramping up their production to meet the rising demand. According to The Expresswire report, the global IoT Chip market size is estimated to reach $12.64 billion by 2026, growing at a 7.5% CAGR.
So, we think it could be wise to bet on quality chip stocks Allegro MicroSystems, Inc. (ALGM), MaxLinear, Inc. (MXL), and Nova Ltd. (NVMI). These stocks are rated A (Strong Buy) or B (Buy) in our proprietary POWR Ratings system.