Surging demand from various industries and technological breakthroughs have invited government support and corporate investments into the semiconductor industry to help address the ongoing chip supply crisis. Given the industry’s solid long-term growth prospects, it is wise to bet on chip stocks Micron (MU), NXP Semiconductors (NASDAQ:NXPI), ON Semiconductor (ON), and Kulicke and Soffa (KLIC) now.Analysts expect the ongoing semiconductor shortage to last through next year. However, the global semiconductor industry delivered a 24% year-over-year sales growth in October 2021. Also, the possibility of the House’s passage of the $52 billion CHIPS Act by the end of this year and increasing corporate investments to ramp up chip production is likely to ease the situation by the end of 2022. The growing investor optimism in this space is evident in the SPDR S&P Semiconductor ETF’s (XSD) 16.8% gains over the past three months, surpassing the SPDR S&P 500 Trust ETF’s (SPY) 5.1% returns.
Moreover, consistent chipmaking breakthroughs should foster the industry’s long-term growth. The global semiconductor chips market is expected to grow at 7.8% CAGR and reach $553.60 billion by 2026.
Given this backdrop and the ongoing volatility in the market, fundamentally-sound and undervalued chip stocks Micron Technology, Inc. (NASDAQ:MU), NXP Semiconductors N.V. (NXPI), ON Semiconductor Corporation (ON), and Kulicke and Soffa Industries, Inc. (KLIC) are likely to witness a rally in the near-term.