8 Semiconductor Stocks That Could Be Acquisition Targets

Cavium Inc (NASDAQ: CAVM) and Marvell Technology Group Ltd. (NASDAQ: MRVL) both traded higher Monday after Marvell announced a $6 billion buyout of its smaller counterpart.

The new deal is just the latest in an industry that's red-hot with M&A. QUALCOMM, Inc. (NASDAQ: QCOM) was already in the process of trying to complete a deal to buy NXP Semiconductors NV (NASDAQ: NXPI) when Broadcom Ltd (NASDAQ: AVGO) stepped in and made a buyout offer for Qualcomm. Just last week, Broadcom completed its $5.5 billion takeover of Brocade Communications Systems, Inc. (NASDAQ: BRCD).

M&A announcements can provide huge upside for investors overnight, and there seems to be no signs that the consolidation cycle in semiconductors is slowing down. In fact, Broadcom management has said it plans to devote half of its free cash flow to buyouts.

Last month, Nomura analyst Romit Shah compiled a list of potential buyout targets for Broadcom, but many of the companies on his list would make excellent acquisitions for other companies as well (check out Shah's track record here). In fact, three of Shah’s potential targets were Qualcomm, Cavium and Marvell. Here’s a look at some of the others:

• Teradyne, Inc. (NYSE: TER)
• Cirrus Logic, Inc. (NASDAQ: CRUS)
• Lumentum Holdings Inc (NASDAQ: LITE)
• II-VI, Inc. (NASDAQ: IIVI)
• Finisar Corporation (NASDAQ: FNSR)
• Oclaro Inc (NASDAQ: OCLR)
• SMART Global Holdings Inc (NASDAQ: SGH)
• Maxim Integrated Products Inc. (NASDAQ: MXIM)

In addition to the possibility of a game-changing buyout, semiconductor investors have enjoyed some major positive momentum in 2017. The iShares S&P NA Tec. Semi. Idx. Fd.(ETF) (NASDAQ: SOXX) is up 46.1 percent year-to-date.

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