A bearish call by a sell-side — I’m on the buy-side — analyst has hit semiconductor stocks. He (in this case) didn’t quibble with the near-term positive outlook for the industry — who could with commodity chips in record short supply? — but he still rang the bell for the end of the semis cycle, given that desperate customers have ordered too much product. Suspected double ordering and long lead times for deliveries have been signals in previous cycles that the party was ending and that a hangover would follow. However, in my view, that day is too far off in this cycle to worry about, so if you exit your semis stocks now, you’ll be sorry.
First, I think that this global supply shortage will last well into 2022. Second, 5G wireless, cloud computing, artificial intelligence, and other killer apps will drive even greater demand for chips. We may not hit the sweet spot for this cycle for some time. It’s too early to talk about its end. Of course, this bearish Street analyst may be proven right at some point. A broken clock is right twice a day. But I recommend that you lean in rather than away from key semis vendors for the foreseeable future. I widely own these chip stocks in alphabetical order:
I’m only uncomfortable short-term with QCOM. I also am concerned that NVDA’s acquisition of ARM, which too many investors may be counting on, will be quashed by regulators. I like the logic behind the deal, but it’s $40 billion prices are egregious. Nonetheless, you’ve 12 other names here that pass my semiconductor stocks sniff test, with my clear favorite being MU.