Semiconductor stocks. What exactly are they? Well, they’re typically companies that produce hardware parts such as integrated circuits, memory, and (of course) semiconductors. Sounds pretty vague, but in case you were still confused, companies such as Micron Technology, Qualcomm, and Apple would be considered semiconductor stocks.
Why bother talking about them? Well, during the pandemic, the only sector that was really holding up the economy when it went plummeting were tech stocks. Mainly, even while big box stores were closed, tech companies still had to provide service to their customers. Tech sales certainly didn’t take a hit like retail did, as during the month of April, software sales were up 34% while hardware sales jumped 63% compared to the previous year. During the lockdown, consumers turned to technology to satisfy their entertainment and connectivity needs.
If we take the earnings report for Apple, for example, we see that revenue is actually up $300 million in Q2 2020 compared to the same quarter last year, despite the coronavirus pandemic being in full effect. Adapting fast to the consumer environment was one thing that resulted in the revenue numbers, but it’s really the nature of the technology sector that allowed semiconductor stocks to continue growing in less-than-desirable economic conditions. Take, for example, AMD, which actually experienced a $520 million gain in Q1 2020 compared to the previous year.
Just like commodities like wheat and gas, technology has become a staple in North American households. If there’s one thing the pandemic taught us about the way we live, it’s that technology has an even bigger impact than we even imagined, and has even more potential. With apps such as Zoom coming into the picture these last few months, we can start to see that technology has the ability to enhance even the most basic tasks like talking to our friends. Without sounding too dystopian, semiconductor stocks have the potential to continue soaring post-pandemic as technology and hardware becomes even more intrusive in our daily lives.
Both XBox and Playstation, popular gaming console brands, have agreed to let AMD create their processing chips to increase performance and reduce costs. Another example of semiconductor company’s involvement in our lives.
Finally, with the rise of 5G, companies are looking to increase their hardware to be able to handle data that’s potentially 100 - 200X faster than 4G LTE. The main thing the semiconductor industry is now facing is the need for innovation, specifically for a better semiconductor chip that delivers higher performance. Innovation hasn’t exactly been a problem for the technological field in general, as each year better technology with more features are rolled out.
Is it time to invest in semiconductor stocks? If you’re interested in investing for the future, then yes. Remember, time is your greatest asset when it comes to investing, and you might just lose out on potential gains if you wait for a better time to buy. Now, that’s not us trying to pressure you to throw your entire savings account into Apple. It’s important to due your research on the companies you’re interested in, but the technology market as a whole should experience steady growth over the next couple of years and you want to be there to ride the wave.
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