A lack of trade tensions between China and the U.S. sent semiconductor stocks to new highs in the last few months. The bell-weather stocks like Applied Materials (NASDAQ:AMAT) and Lam Research (NASDAQ:LRCX) signaled a rebound ahead, as the supplies eased. Demand is strengthening because chip customers no longer fear any business disruptions.
The set-up for a renewed chip demand cycle is already getting priced in the sector. Although risks of overpaying for stocks is higher, a product refresh in smartphones and computers will drive demand. With autonomous cars, cloud computing, and strong server hardware sales, chip demand keeps rising. So, investors need not sell Micron (NASDAQ:MU) or Western Digital (NASDAQ:WDC) despite the recent strong advance. At a forward P/E of below 11 times, WDC stock is still a clear buy at higher levels.
Your Takeaway
Chip stocks like Nvidia (NASDAQ:NVDA) and AMD (NASDAQ:AMD) moved at a solid uptrend. Their valuations are so high that these stocks do not suit value investors. Momentum investors may still trade these stocks with success. But as AMD’s earnings report looms, a ‘sell on the news’ event might create a better entry point for investors who missed the rally.
