Semiconductors have had a good week.
The iShares PHLX Semiconductor ETF (SOXX) is up just over 3% over the last week, while big names in the space like Nvidia (NASDAQ: NVDA) and Advanced Micro Devices (NASDAQ: AMD) are up 6.15% and 9.73%, respectively.
“It definitely has been the leadership. It has also been the sign of the risk-on trade for the market. I think that even if you get a little short term pullback in the semiconductor stocks here, I’d be a buyer of it,” said Craig Johnson, chief market technician at Piper Jaffray.
“When you look at this chart, the longer-term trend is still intact, you’re above a rising 50- and 200-day moving average, and when you start unpacking the index and looking at some of the best-performing names—the five largest names represent 40% of this index—and those are all charts that look like buys, so I would be buying any pullbacks in the semiconductor stocks,” Johnson said.
The top five holdings of the SOXX semiconductor ETF are Nvidia, Texas Instruments (NASDAQ: TXN), Qualcomm (NASDAQ: QCOM), Broadcom (NASDAQ: AVGO), and Intel (NASDAQ: INTC), and they’ve had a bit of a mixed week. While NVDA is up over 6%, and Broadcom and Qualcomm are both up over 5%, Intel and Texas Instruments are ending the week with a gain of under 2%.
Tocqueville Asset Management portfolio John Petrides says there’s opportunity if the semis come under pressure.
“I agree that you buy the dips for the semiconductors, I think there’s way too many crosscurrents right now, and I wouldn’t chase the rally we saw last week,” Petrides said. “Let’s not forget the index is up about % since December 2018. So, the group has performed quite strongly.”
Of the group, RBC analyst Mitch Steves likes AMD, and Nvidia.
Steves says of Nvidia, “Our checks suggest that gaming demand is tracking slightly ahead of plan and we think Data Center is coming back in Q4.” The analyst raised his price target on NVDA to $217—nearly 14% higher than the current price—and said he thinks the stock “will be the best-performing large cap in our universe over the next 6 – 9 months.”
As for AMD, Steves says “recent concern that AMD Ryzen 3 is having reliability issues is unfounded… If the stock remains at current levels and does not move notably higher before Q3 earnings, we would but the stock more than usual.”
“AMD rapidly gains share in the server market and sees continual high double-digit growth in Computing and Graphics. This creates a revenue base north of $10B and operating margins expand into the 20%+ territory. With a successful next-generation product launch, this allows the company to gain 30%+ share of the server market and we think the stock would be worth more than $60.”
That would see the stock 94% higher than the price as of this writing, but for now, Steves is keeping his price target at $44, indicating 42% upside ahead.
Nomura Instinet analyst David Wong says semiconductors are up agains some big headwinds, but there’s one stock in the space that he says is just too cheap to ignore.
“We believe that many risks remain for U.S. semiconductor companies including uncertainties related to U.S./China trade issues and U.S. action against specific Chinese companies such as Huawei,” Wong wrote in a note to clients. “However, in our view, Xilinx’s (NASDAQ: XLNX) stock price and estimates have, in recent months, adjusted to reflect these risks.”
According to Wong, Xilinx boasts “strong positioning” in 5G and the analyst has boosted his rating on the stock to Buy from Neutral, with a $115 price target – nearly 22% higher than the current price.