The seasonal strength in technology stocks typically ends in January. The Consumer Electronics Show 2020 (CES 2020) usually sets the peak, especially for chip stocks, after companies showcase their products. So, look for semiconductor stocks to peak this month.
Traders will watch Advanced Micro Devices (NASDAQ:AMD) closely, especially after the stock traded at all-time highs last week at $49.25. Valuations are through the roof but still do not exceed the EPS growth expectations for 2020. At 45 times forward P/E, the forward PEG is slightly above 1.0 times. This assumes AMD will grow its EPS by 36.5% in the next five years.
Intel’s (NASDAQ:INTC) failure to drop by much when AMD rose suggests that markets are not convinced Intel will lose market share. Even if it does, Intel has billions available for marketing expenses and R&D. It may lower chip prices to minimize market share loss. And it is selling refreshed chips while working on upgraded ones.
Applied Materials (NASDAQ:AMAT) is another bell-weather chip stock to watch. At 52-week highs, the stock is inexpensive at a 14 times P/E.
Still, the memory market was slightly worse than expected while logic and foundry performed far better than management expected. Looking ahead, NAND is recovering, followed by DRAM. So even if chip stocks peak this month, any potential drop creates a better entry point for investors seeking exposure in this sector.
