This time last year, semiconductor stocks were heading further down after having struggled for months. But since the sector hit bottom on Christmas Eve last year, things have been looking up.
In fact, the SMH Semiconductor VanEck ETF is up a whopping 64% since December 24, 2018, double S&P 500’s nearly 32% return in the same time frame. Just in the last month alone, the SMH is up almost 9%.
And if recent history is any guide, it could still have room to run.
According to analysis by CNBC, the SMH has gained 9% in a month twelve times since 2010. Following such a run-up, the ETF trades positively 83% of the time and returns an additional 2% over the following two weeks.
The semiconductor stocks that have historically done the best when such a scenario plays out include Skyworks Solutions (NASDAQ: SWKS), Analog Devices (NASDAQ: ADI), and Maxim Integrated (NASDAQ: MXIM). These stocks have, on average, returned 4.82%, 2.27%, and 2.17%, respectively, in the two weeks following the SMH climbing 9% in a month.
But this time around, it may be the stocks that have led the sector higher that deliver stronger returns over the next several weeks and then some.
Among the stocks that have led the chip sector higher over the last month: Advanced Micro Devices (NASDAQ: AMD), Universal Display (NASDAQ: OLED), and Marvell Technology (NASDAQ: MRVL), which are up 23.15%, 14.86%, and 14.22%, respectively, in the last month.
Of all of these, AMD and Universal Display have done the best so far this year, with AMD up 108% and Universal Display up 113% year-to-date.
Earlier this week, AMD announced that Tencent will be using its second-generation EPYC processors for its cloud-computing service, a big win for the chipmaker.
Nomura Instinet analyst David Wong said that AMD is quickly gaining substantial market share in many of the key computing categories. “AMD’s share momentum continues,” the analyst wrote. “AMD gained share in data center, desktop, and notebook processors in the September quarter.”
As for Universal Display, the stock jumped 16% on October 31 after smashing analysts’ estimates for its Q3 earnings.
The iPhone supplier reported revenue for the quarter of $97.5 million, a more than 25% year-over-year increase, while net income came in at $37 million, or $0.78 per diluted share, a 62% jump from the same period last year.
“We are pleased to report another quarter of solid results,” said Sidney D. Rosenblatt, Universal Display Executive Vice President and CFO, in a press release. “During the quarter, OLED activity continued to gain strength on a global scale. As a result, we are raising our 2019 revenue guidance and believe that we are well on track to deliver record revenues and earnings for the year, and expect this strength to continue into 2020.”
“We believe that the proliferation of OLEDs across the consumer electronics spectrum is fueling a tremendous multi-year capex cycle,” Rosenblatt continued. “As panel makers continue to shift more of their focus to OLEDs as the future of displays, we are seeing a corresponding increase in OLED investment momentum. Based on our current forecasts and industry data, we believe market growth will continue and estimate that the installed capacity base of OLEDs at the end of 2021, as measured in square meters, will increase by approximately 50% over the installed capacity base at the end of 2019.”