MW Hedge funds loaded up on these two chip stocks this year. Should you buy them too?

By Laila Maidan

Nvidia's stock has been a favorite for some time, but two other semiconductor companies recently cracked Goldman's list of popular hedge-fund holdings

Hedge funds loaded up on shares of Lam Research Corp. and Micron Technology Inc. in the first quarter, according to research from Goldman Sachs.

And investors may want to take a cue from the hedge-fund managers. The Goldman Sachs Hedge Fund VIP ETF GVIP has outpaced the S&P 500's SPX returns in more quarters than not - or 59% of them dating back to 2001.

Despite stock-market volatility this year, this group of institutional investors has been able to weather 2025 in positive territory. Admittedly, so has the S&P 500, but the basket of the top stocks held by them has returned 6% so far this year, according to Goldman Sachs.

Lam Research Corp. $(LRCX)$ and Micron Technology Inc. $(MU)$ now crack Goldman's list of the 50 stocks that most frequently make up the top 10 holdings among institutional investors tracked by the VIP basket. At the end of March, 27 hedge funds held Lam's and 36 held Micron's, out of 509 funds with 10 to 200 distinct U.S. equity positions. Both stocks had at least 10 funds that held these stocks in their top 10 holdings. Data used by the firm is based on the latest 13-F filings, which were due May 15.

Lam provides equipment to manufacture smaller semiconductors, while Micron makes memory and storage products used for cloud servers, mobile phones and other applications.

Among the 31 companies in the iShares Semiconductor ETF SOXX, Micron ranks third and Lam ranks 11th based on their projected compounded annual sales growth rates from calendar 2024 through calendar 2026, looking at consensus estimates from analysts polled by FactSet. Micron's two-year estimated sales CAGR comes in at 23%, and Lam's is at 10.3%. Nvidia Corp. $(NVDA)$ has a two-year estimated sales CAGR of 39.8%. While Nvidia is also on the list of stocks held most by hedge funds, it's been a mainstay of portfolios for a longer period of time.

Lam, meanwhile, has a forward price-to-earnings ratio of 20.9, with the metric measuring how much an investor pays for every dollar the company earns. Micron has a forward P/E of 9.9, and Nvidia has a forward P/E of 28.1, based on the FactSet consensus. Micron's relatively low P/E means the stock is cheap, but the higher P/Es for the other two suggest investors might have more confidence about their earnings-growth paths.

-Laila Maidan

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

May 21, 2025 13:41 ET (17:41 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.