Semiconductors are starting to outperform as investors prepare for results from firms like Intel and Advanced Micro Devices.
The Philadelphia Semiconductor Index ($SOX) broke out to new record highs on July 6 and have held their ground since. Its relative strength versus other technology stocks and software makers has turned positive following a month of underperformance.
$SOX also fell much less than other tech stocks on the big dip last week. Those points may indicate improved sentiment.
Chip makers have struggled more with coronavirus than other technology companies like Zoom Video Communications (ZM). On one hand, they benefit from increased demand for cloud computing and video gaming. On the other hand, chips are economically sensitive because they’re used in ordinary devices like machinery.
However, recent news suggests that headwind may be turning around. Forward-looking industrial reports from the New York and Philadelphia Federal Reserve beat estimates last week. Chinese economic growth also surprised to the upside and Europe has been recovering.
Just today, EU leaders agreed to an $857 billion coronavirus-recovery package. The deal required several days of negotiations. It’s viewed as a major breakthrough, and boosting other economically sensitive sectors like energy.
The semiconductor industry entered the current crisis on a strong footing thanks to the spread of mobile devices, cloud computing and video games. Investors have also focused on the potential for 5G networking to drive a whole new investment cycle.
That helped the global chip industry return to 5.8 percent growth in May (the most recent month reported by the Semiconductor Industry Association). It hasn’t been that high since December 2018.
Another analysis firm, IDC, detected unusually strong demand for PCs as employees work from home in a report on July 9. This is interesting because personal computers were recently considered a dying category.
Investors now prepare for several major chip makers to report earnings through the end of the month. (all scheduled for the post market):
| Date | Company | Field |
| 7/21 | Texas Instruments (TXN) | Industrial, machinery |
| 7/21 | Teradyne (TER) | Chip-making equipment |
| 7/23 | Intel (INTC) | Computers, data centers |
| 7/23 | Skyworks Solutions (SWKS) | Mobile, wireless |
| 7/28 | Advanced Micro Devices (AMD) | Cloud computing, gaming |
| 7/28 | Maxim Integrated Products (MXIM) | Industrial, machinery |
| 7/29 | Qualcomm (QCOM) | Mobile, wireless |
| 7/29 | Lam Research (LRCX) | Chip-making equipment |
| 7/29 | Qorvo (QRVO) | Mobile, wireless |
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