The Most Important Takeaway from the Fortune 500 List

Lou Basenese

Tuesday, May 24, 2022

I love it when the data keeps rolling in to support a key investment thesis.

This time, it came from what many of you might consider an unlikely source — the 68th annual Fortune 500 list.

Forget about what company checked-in at the top. (Spoiler alert: It’s Walmart Inc. (WMT)).

What’s most instructive is the number of spots that major semiconductor companies climbed in the past year.

Why? Because it confirms that semiconductors represent one of the strongest — if not the strongest — growth trends in the market today. And for the foreseeable future, as I’ve shared before.

As such, we’d be foolish not to be investing heavily in the sector.

With that in mind, today I’m sharing five chip stocks fit for any portfolio, as well as one you should certainly keep avoiding…

Welcome to the Department of Redundancy Department

I don’t care how tired you get of me saying it, but it’s true.

We’re living in the Era of Tech-Biquity, whereby tech infiltrates more and more of our personal and professional lives. And eventually, it becomes a seamless component in, well, everything.

The key recognition, of course, is that semiconductors function as the oxygen for this technology takeover. And therefore, chips promise to be a “forever” growth trend for all intents and purposes.

The fact that major chip companies soared up the Fortune 500 list, which ranks companies based on total revenue in fiscal 2021, proves the growth is not only happening now, but accelerating.

Consider, this year’s list included major leaps higher by the following publicly traded chip companies:

  • Advanced Micro Devices, Inc. (AMD), up 83 spots to No. 226 thanks to higher prices for the company’s personal computer and graphics chips, and nearly double the demand for its gaming and data server chips.
  • NVIDIA Corporation (NVDA), up 50 spots to No. 134, thanks to surging demand for its gaming, crypto mining, cloud computing, and artificial intelligence chips. Forget about sales soaring 61%, total profits for the company more than doubled.
  • QUALCOMM Inc. (QCOM), up 17 spots to No. 107, as sales for all four of its chip divisions witnessed at least 50% growth.
  • Lam Research Corporation (LRCX), which I’ve featured here before, jumped 54 spots to No. 250. And Applied Materials, Inc. (AMAT) leapt 20 spots to No. 156. Neither company makes chips. Instead, they make fabrication equipment that makes leading chips. In other words, the industry growth is across the board, as even the “pick-and-shovel” companies are experiencing significant growth, too.

If you’re trying to assemble a portfolio to benefit from top tech growth trends, you’d be hard pressed to find a better selection of chip stocks to invest in for the long-term.

But whatever you do, don’t invest in your grandfather’s “go-to” chip stock — Intel Corporation (INTC).

The latest Fortune rankings show the company continues to struggle to unlock new growth, falling six spots after sales rose a measly 1.5%.

More Growth Ahead

Remember, the Fortune 500 list is based on last year’s sales. That might lead some to believe the industry’s growth spurt is a flash in the pan, caused by unsustainable pandemic forces.

I assure you that’s not the case, and in future columns, I’ll share more about the specific areas of the chip industry enjoying the fastest growth.

For right now, all you need to understand is this: the latest monthly data confirms the growth trend remains well intact.

Case in point: Global chip sales soared 26.2% year-over-year in April.

The bottom line? We need to make sure we’re investing in chip companies, plain and simple. No matter what’s going on with the broader market.

More specifically, we need to focus on chip companies enjoying the fastest growth, because there’s no denying that the chart-topping growth will continue. And share prices are all but guaranteed to go along for the ride.

Ahead of the tape,

Tags: fortune-500 semiconductors