Goldman Sachs says buy these 6 semiconductor stocks as they report ‘strong’ demand

Published Thu, Aug 19 20217:30 PM EDT

Lucy Handley @in/lucy-handley-b2b0a61a/@lucyhandley

Analysts at Goldman Sachs have confirmed their buy ratings on several semiconductor stocks after holding meetings with Taiwanese companies in the sector this week, amid a global chip shortage . "Key discussions were primarily centered on the supply demand outlook, pricing trend, competition landscape as well as the LTA [long term agreement] trend within the supply chain," Goldman's analysts led by Bruce Lu stated in an Aug. 17 research note. The bank reiterated its buy rating on United Microelectronics , a semiconductor foundry (or manufacturer), saying: "The company remains bullish on the overall demand outlook." The firm's management also expects a gradual rise in revenue from automotive customers, with "strong" demand for some components, Goldman reported, and the stock remains on the bank's conviction list. Semiconductor foundry service provider Vanguard is also a buy for the bank. "The overall demand growth outlook will continue to outpace supply growth, which will support its UTR [utilization rate] to remain at very high levels into 2022 and beyond," the analysts stated. "We reiterate our Buy rating on Vanguard as we like the company's solid execution and good track record," they added. Integrated circuit-maker Novatek Microelectronics will pass on cost increases to customers, according to Goldman, and the firm is seeing demand for large TV components and OLEDs (organic light emitting diodes) for smartphones. "Given our constructive views on Novatek's long-term structural growth and healthy earnings expansion, we reiterate our Buy rating," the analysts stated. Realtek , a fabless (or semiconductor design) company, is also a buy for Goldman, and the firm reiterated its "strong" demand outlook, the bank said. "Given our unchanged constructive views on Realtek's mid-term growth and quality of earnings with more server/networking/automotive projects, we reiterate our Buy rating," the bank's analysts stated in an Aug. 18 research note. MediaTek , another fabless company, is set to see "solid" sales driven by "strong" demand from the gaming and automotive sectors, Goldman's analysts stated. "The medium to long-term trend remains intact as we expect addressable market expansion and product mix improvements," they added, reiterating their buy rating in an Aug. 18 research note. Semiconductor foundry TSMC expects to see "strong long term structural demand," in sectors including 5G and automotive, according to Goldman's analysts in an Aug. 19 research note. "We maintain our constructive view on the industry's underlying structural growth areas (such as 5G/AI), TSMC's solid technology leadership and execution, an easing competitive landscape, and sustainable shareholder returns," the analysts stated. TSMC is buy rated by Goldman, and remains on the bank's conviction list.

Integrated circuits on a circuit board.

filonmar | E+ | Getty Images

Analysts at Goldman Sachs have confirmed their buy ratings on several semiconductor stocks after holding meetings with Taiwanese companies in the sector this week, amid a global chip shortage.