Somewhat amazingly perhaps, at least for the time being, the trade tariffs and the systemic trade overhang appear to have done little to dent the current economy. With that noted, many on Wall Street feel that future projects are being postponed or trimmed back due to the overall uncertainty. Plus, given the ebb and flow of the discussions, especially with China, until an ironclad deal is done, not only with China, but Mexico, Canada and the European Union, investors can expect continued volatility.

One area many are concerned about is semiconductors, and with good reason. With demand issues in play due to the trade issues, it is important to look at the positives in the industry. In a new research report, SunTrust feels there are more than enough positives to pave a path for a stronger 2020.

The SunTrust analysts noted four specific items in the report:

1. The acceleration of vehicle electrification, culminating in electric vehicles that contain significantly more semi content than traditional vehicles.
2. Acceleration in IoT devices that is increasingly more reality than hype owing to better processors and better connectivity and real growth.
3. AI training in the datacenter, and inference at the edge and in the datacenter that is just emerging from infancy and passing through its first inventory cycle.
4. Communications equipment that is in the early stages of growth from 5G related buildouts.

The firm rates four chipmakers at Buy, and these stocks are suitable for aggressive growth accounts with higher risk tolerance.

Analog Devices

This stock could very well continue to benefit from an increase in information technology and upcoming 5G spending. Analog Devices Inc. (NASDAQ: ADI) is a leader in the design, manufacture and marketing of analog, mixed-signal and digital signal-processing integrated circuits for use in industrial, automotive, consumer and communication markets worldwide. It offers signal-processing products that convert, condition and process real-world phenomena, such as temperature, pressure, sound, light, speed and motion, into electrical signals.

In 2017, the company introduced a highly integrated polyphase analog front end with power quality analysis designed to help extend the health and life of industrial equipment while saving developers significant time and cost over custom solutions. Achieving extremely accurate, high-performance power quality monitoring typically requires customized development, which can be expensive and time-consuming.

The company has among the best end-market exposure, with high communications and aerospace/defense market exposure, in addition to offering investors a powerful 5G content growth story. Plus, acquisitions over the past few years like Linear Technology and Hittite Microwave should provide revenue and additional cost synergies that are still coming.

Analog Devices investors receive a 1.90% dividend. The SunTrust price target for the shares is $122, and the Wall Street consensus target is lower at $114.68. The stock closed Wednesday’s trading at $113.94 per share.

Broadcom

This stock was absolutely hammered in early May after the company cut revenue guidance for the full year. Broadcom Inc. (NASDAQ: AVGO) has an extensive semiconductor product portfolio that addresses applications within the wired infrastructure, wireless communications, enterprise storage and industrial end markets.

Applications for Broadcom’s products in its end markets include data center networking, home connectivity, broadband access, telecommunications equipment, smartphones and base stations, data center servers and storage, factory automation, power generation and alternative energy systems and displays.

Top Wall Street analysts like Broadcom’s leadership in the mobile, data center and broadband markets, and especially in the radio frequency (RF) arena. Many Wall Street analysts see a cyclical rebound in industrial and communications demand as a distinct 2020 event.

Broadcom investors receive a very solid 3.72% dividend. SunTrust has a price target of $307, while the posted consensus target is slightly lower at $303.21. Shares closed most recently at $285.08 apiece.

Microchip Technology

Shares of this huge Internet of Things benefactor and have been very strong recently. Microchip Technology Inc. (NASDAQ: MCHP) is a leading provider of microcontroller, mixed-signal, analog and flash-IP solutions, providing low-risk product development, lower total system cost and faster time to market for thousands of diverse customer applications worldwide.

The company’s acquisition of Microsemi remains an outstanding addition, but, as expected, it has taken some time to integrate fully. Plus, the overall trade issues have weighed on the stock, like many in the industry. For those with a longer time horizon, this is perhaps one of the best values in semiconductors now.

Microchip’s dividend yield is 1.61%. The $104 SunTrust price target is right in line with the $104.83 consensus price objective. The stock closed at $90.76 on Wednesday.

NXP Semiconductors

This is still considered a top play for investors looking for a chip stock with Internet of Things exposure. NXP Semiconductors N.V. (NASDAQ: NXPI) became the fourth largest semiconductor company in the industry after it merged with Freescale in late 2015. It is also important to note that the combined company is the number one supplier in auto semiconductors with a 14% share, as well as the number one supplier in global microcontrollers and a dominant supplier in mobile payments.

NXP continues getting its chips into high-growth areas such as contactless mobile payments, the Internet of Things, mobile phone charging, increased cellular data consumption and even LED lighting. With shares trading at a solid discount to peers, some Wall Street analysts are very positive on the faster earnings growth potential relative to its competition.

Investors receive a 1.04% dividend. SunTrust has set its price target at $123. The consensus target is much lower at $115.21, and the stock closed trading most recently at $96.40 per share.

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These four top semiconductor stocks have been absolutely pummeled. While the trade issues and the slowdown in the overall sector may not be settled anytime soon, aggressive growth accounts could start to nibble at these top companies. Caution though is still advised, as second-quarter earnings season is in full swing.

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