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Chipmakers Lead S&P 500 Rally: 5 Stocks to Buy

The S&P 500 once again gained on Sep 14, completing a five-day winning streak backed by a chipmaker stocks’ rally. For quite some time now, chipmaker stocks have been driving markets. Last week’s rally was prompted by the Trump administration’s invitation to Beijing for a fresh round of talks, in an attempt to resolve trade disputes.

Understandably, trade war fears are being priced in gradually, and investors have started showing faith in tech stocks once again. Friday’s gain once again proves that investors believe tech stocks are still less susceptible to tariffs compared to industrials. Also, tech stocks have been one of the best performers on the market this year. Given this scenario, investing in chipmaker stocks looks like a profitable option.

Chipmaker Stocks Help S&P 500 Gain

On Sep 14, the S&P 500 posted its fifth day of gains, with chipmaker stocks once again leading the rally. The broad index gained 0.03% to close at 2,904.98 points. The Van Eck Vectors Semiconductor ETF (SMH) increased 1%. Shares of Advanced Micro Devices, Inc. AMD jumped 7.4%, while Nvdia Corporation NVDA gained 1.9%.

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The PHLX Semiconductor index (SOX) rose 1.1% on Friday. Tech tocks have been the second-best performer this year, led by chipmaker stocks. The Technology Select Sector SPDR (XLK) gaining 17.2% on a year-to-date basis. Trade war fears have been taking its toll on markets. However, investors have finally started believing that tech stocks aren’t as vulnerable to the malaise of the trade war as industrials.

Incidentally, the S&P 500’s five-day winning streak comes at a time when the Trump administration is readying to impose tariffs on $200 billion worth of Chinese goods, after the end of a public comment period last week.However, amid all the fears of an escalation in the trade spat, on Sep 12, the United Stated invited Beijing for a fresh round of talks in an attempt to resolve trade disputes. Understandably, investors have started believing once again that chipmaker stocks are poised to perform well in the days to come.

Chipmaker Market Poised to Grow

Tech stocks have been responsible for the market’s rally for quite some time now. The Semiconductor Industry Association on Sep 4 said that global semiconductor sales reached $39.5 billion in July, up 17.4% year over year. Moreover, global semiconductor sales were 0.4% higher than June’s total of $39.3 billion. 

On Sep 5, World Semiconductor Trade Statistics (WSTS) raised its forecast for the global chip market for 2018, for the second time in two months. Now, WSTS expects the worldwide semiconductor market to grow 15.7% to $477 billion in 2018.

Moreover, analysts believe that trade war fears are temporary and the effect may not be felt only in the near term. Also, China’s limitations in building its own tech industry might restrict it from acting against U.S.-based chipmakers.

Our Choices

Trade war fears have been taking its toll on markets but investors finally seem to be shrugging these off. Moreover, the S&P 500’s rally, hints at investors’ confidence getting reinstated in chipmaker stocks.

This makes it an opportune time to invest in chipmakers. However, picking winning stocks may be difficult. We have narrowed down our search to the following stocks based on a good Zacks Rank and other relevant metrics.

Maxim Integrated Products, Inc. MXIM designs, develops, manufactures and markets a broad range of linear and mixed-signal integrated circuits, commonly referred to as analog circuits.

The company has expected earnings growth of 14.4% for the current year. The Zacks Consensus Estimate for the current year has improved by 6.5% over the last 60 days. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Lattice Semiconductor Corporation (LSCC) designs, develops and markets high performance programmable logic devices and related development system software. 

Lattice Semiconductor, with a Zacks Rank #1, has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved by 24% over the last 60 days.

Vishay Intertechnology, Inc. VSHis one of the world's largest manufacturers of discrete semiconductors (diodes, MOSFETs, and infrared optoelectronics) and passive electronic components (resistors, inductors and capacitors). 

Vishay Intertechnology sports a Zacks Rank #1. The company has expected earnings growth of 39.9% for the current year. The Zacks Consensus Estimate for the current year has improved by 7.5% over the last 60 days.

Texas Instruments TXN is a global semiconductor design and manufacturing company that develops analog ICs and embedded processors. 

Texas Instrumentscarries a Zacks Rank #2. The company has expected earnings growth of 32.2% for the current year. The Zacks Consensus Estimate for the current year has improved by 2.5% over the last 60 days.

ON Semiconductor ON is a supplier of broadband and power management integrated circuits and standard semiconductors used in numerous advanced devices.

Zacks #2 Ranked ON Semiconductor Corporation has expected earnings growth of 26% for the current year. The Zacks Consensus Estimate for the current year has improved by 4% over the last 60 days.

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Advanced Micro Devices, Inc. (AMD) : Free Stock Analysis Report
 
Lattice Semiconductor Corporation (LSCC) : Free Stock Analysis Report
 
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
 
Texas Instruments Incorporated (TXN) : Free Stock Analysis Report
 
ON Semiconductor Corporation (ON) : Free Stock Analysis Report
 
Maxim Integrated Products, Inc. (MXIM) : Free Stock Analysis Report
 
Vishay Intertechnology, Inc. (VSH) : Free Stock Analysis Report
 
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