By Daniel Newman
Up nearly two times from its pre-pandemic level and more than 3.5 times from its March 2020 low, Applied Materials /zigman2/quotes/209393259/composite AMAT +4.28% has been a name that investors have grown more enthusiastic about while benefiting from the current semiconductor-supply constraints.
As opposed to other names on this list, Applied Materials isn’t a chipmaker but rather supplies key materials to chipmakers, which is more in demand than ever before.
The company has also recently unveiled plans to continue growth by empowering its customers to accelerate gains in chip performance despite the slowing of Moore’s Law.
These plans will include the company offering materials required to develop entirely new types of silicon for 3D packaging and chiplets, which are expected to gain momentum in coming innovation cycles.
AMAT also just announced a new go-to-market approach to shore up revenue continuity, announcing its plans to generate 70% of future service and parts revenue through subscription-like long-term agreements.
The combination of demand for chips, the complexity and limited competition in this space, and a bullish outlook make Applied Materials an interesting name for investor consideration.
Micron Technology /zigman2/quotes/205710729/composite MU +6.21% is best known for its DRAM and NAND flash memory solutions. This focus area doesn’t tend to be as exciting as building central processing units (CPUs), graphics processing units (GPUs), or systems (SoC) for servers, PCs and smartphones. Still, it is a lucrative business that Micron has been extremely strong in executing against the opportunity.
There are many reasons to like Micron. Short-term, the supply constraints have been a boon for Micron, as memory fuels our infrastructure and devices. These catalysts have driven 30% overall revenue growth for Micron in its most recent quarter and perhaps a most noteworthy 44% top-line growth of its mobile business unit.
The mobile growth can also be attributed to Micron’s innovation, including its recent multichip package (MCP). The MCP reflects a new offering from 2020 that combined both DRAM and fast flash storage to improve data access speed, improve power efficiency and increase yield by reducing space occupied on printed circuit boards (PCBs). I expect the mobile growth to be robust as smartphone volumes continue to outpace market expectations — one of the reasons for the growing supply constraints.
With overall semiconductor demand on the rise, but also expected growth in autonomous driving, infotainment, 5G, IoT, memory and networking, these four companies stand to benefit and are all showing the right trajectory in growth, indicating that perhaps they have earned the right to more investor attention.
<EMPHASIS>Daniel Newman is the principal analyst at </EMPHASIS>Futurum Research<EMPHASIS>, which provides or has provided research, analysis, advising, and/or consulting to Nvidia, Intel, Salesforce, Qualcomm, Microsoft, Amazon, Oracle, Lattice Semiconductor, Marvell and dozens of companies in the tech and digital industries. Neither he nor his firm holds any equity positions with any companies cited. Follow him on Twitter <INTERNET LOCATION="EXTERNAL" URL="https://twitter.com/danielnewmanuv">@danielnewmanUV</INTERNET>.</EMPHASIS>