2017 has been the year of the chip, and no, we are not talking about the Lay’s products seemingly thrown into every new Taco Bell menu item. Tech stocks have dominated markets this year, and a large part of that support has come from its chip-producing companies. Semiconductor stocks have surged as their capabilities continue to become more essential to our daily life. These highly-complex, highly-functional chips provide a glimpse into the future of technology, and markets have responded by launching semiconductor stocks into the forefront of the investing community.
But how does the surge in semiconductors affect my investments? Let’s take a deeper look at we step closer to achieving financial fluency.
Nvidia: The Golden Child
Nvidia (NVDA), the golden child of the semiconductor community, has seen its stock price increase by more than double this year. Although the company was founded as a manufacturer of 3D graphic-processing units, its recent meteoric rise has largely been due to the newfound uses of its product, which is a common trend among the industry. Nvidia’s most popular chips, the GeForce GTX 1080 and 1070, can be used for mobile computing, automation, and cryptocurrency mining in addition to its original gaming purpose.
The rise of Bitcoin has helped Nvidia, along with many other semiconductor stocks, skyrocket alongside its historic returns. Cryptocurrency mining has taken the investing community by storm as some firms support it while others continue to dismiss it. Either way, when billions of dollars are pouring into a security on a daily basis, someone is making money off of it. And while not every Bitcoin owner has made historic returns as of now, Nvidia continues to take advantage of this niche market.
AMD: A Worthy Competitor?
Although Nvidia has dominated the market for semiconductor stocks, Advanced Micro Devices (AMD) has started to tighten the race. With the release of the company’s new Radeon RX Vega 56 and 64 graphics cards this year, AMD has pushed itself into the conversation of high-end graphic chip processors. Similar to Nvidia, AMD has also benefited greatly from the rise of cryptocurrency. The day the new Radeon chips were released, they sold out almost immediately as cryptocurrency miners bought more in an effort to speed up their mining. Although AMD’s CEO, Lisa Su, explained during their third-quarter earnings report that cryptocurrencies are not a long-term growth factor for its chips, the company has taken advantage of the newfound obsession with the digital currency.
The Rest of the Semiconductor Industry
Many investors are quick to chalk up semiconductor stocks’ historic rise as overvaluations, however, Broadcom’s (AVGO) recent bid of a semiconductor company proves quite the opposite. Chip-maker Broadcom recently bid $103 billion to buy Qualcomm (QCOM), a chip-processing company that specializes in mobile phone hardware. With Broadcom’s latest bid, the company is attempting to take over the mobile computing industry.
The acquisition would allow Broadcom to take over the chip industry consisting of nearly 2 billion smartphones expected to launch next year. Although we have no idea how long cryptocurrency will last, Broadcom’s bid proves that chip-making companies are here to stay. Highly advanced graphic-processors are essential to growth in automation, mobile computing, and gaming. Whether Bitcoin mining continues to grow or digital currencies go bankrupt tomorrow, it is clear that graphic-processors are the key to technology growth are an important sector to analyze with our financial fluency tools.
Semiconductor stocks, led by Nvidia, AMD, and many others, have demonstrated meteoric rises this past year as they continue to be pushed into the forefront of the investing community. While the industry has historically been known for its high-speed gaming, mobile, and automated functions, the rise of cryptocurrency is now contributing to chip-makers’ skyrocketing share prices.
Graphic-processing chips are a key to cryptocurrency mining, and Bitcoin-enthusiasts have been quick to buy every last one of them. Although many investors are quick to write off semiconductor stocks as overvalued due to their historic rise in recent years, Broadcom’s recent bid to acquire a fellow chip producer proves that this industry is valuable.
As graphic-processing chips continue to grow more complex and play an integral role the future of technology, the market has responded appropriately by racing to invest in the industry’s leading companies. By surrounding yourself with a greater understanding of the markets, you can continue to step closer to financial fluency.
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Nvidia is one of the leading producers in semiconductors headlined by its market-leading GPUs and mobile processors and computing. NVDA is up more than 100% since last year.
Advanced Micro Devices is a global semiconductor-producing company that specializes in computer processes and technological innovation.