Wy Nvidia, Intel, AMD, Broadcom could surge on Momentum

The Philadelphia Semiconductor Sector Index (SOX) is likely to rise by nearly another 13% in the next three months, per historical research by Bespoke Investment Group, as reported by Barron's. Among the big stocks in that index are: Nvidia Corp. (NVDA
NVDA
NVIDIA Corp
201.86
+3.15%

), up 82% YTD; Intel Corp. (INTC
INTC
Intel Corp
44.40
+7.38%

), up 15% YTD; Advanced Micro Devices Inc. (AMD
AMD
Advanced Micro Devices Inc
11.84
-1.37%

), up 9% YTD; and Broadcom Ltd. (AVGO
AVGO
Broadcom Ltd
252.90
+3.75%

), up 41% YTD.

Paul Hickey, co-founder of Bespoke, tells Barron's that the SOX has risen in 37 of the 50 trading days through Wednesday, for only the second time in history, the first being in 1998. He added that stretches of 50 trading days in which it rose 36 times were recorded in 1995 and 2014. After those periods in 1995, 1998 and 2014, the SOX gained an average of 12.7% during the next following three months, Hickey observes. The VanEck Vectors Semiconductor ETF (SMH
SMH
VanEck Vct Sem
100.59
+2.00%

) is suggested by Hickey as a way to invest in the SOX.

Stock Fundamentals
Regarding the four semiconductor stocks highlighted above, their current forward P/E ratios and consensus full-year EPS estimates for the current and next fiscal years are, per Thomson Reuters data reported by Yahoo Finance: Nvidia, 48.49, $3.63, $4.02; Intel, 13.25, $3.01, $3.10; AMD, 34.36, 13 cents, 35 cents; and Broadcom, 13.90, $15.91, $17.62.

Analysts at KeyBanc Capital Markets Inc., a division of KeyCorp (KEY
KEY
KeyCorp
18.37
-0.81%

), as well as those as at Morgan Stanley (MS
MS
Morgan Stanley
51.16
+0.77%

), recommend Broadcom as one of the chipmakers that should benefit long-term from being major component suppliers for the iPhone line from Apple Inc. (AAPL
AAPL
Apple Inc
163.05
+3.58%

). However, it may be a bumpy ride in the near term, given production delays that are hampering the rollout of the iPhone X. (For more, see also: 3 Chipmakers Poised to Thrive on Apple's Supercycle.)

Meanwhile, both Nvidia and Intel are among the manufacturers supplying semiconductors for use in increasingly sophisticated smart machines, the Wall Street Journal reports. For example, Deere & Co. (DE
DE
Deere & Co
133.25
+0.84%

) is using computer vision powered by Nvidia devices in a rig that automates the labor-intensive process of removing sprouts that are too close to each other. Meanwhile, Intel is among those chipmakers looking for a firm foothold in emerging technologies such as autonomous cars and personal robots, the Journal adds.

Technical View
Based on technical analysis, Broadcom looks attractive as the result of successively higher highs and higher lows since early 2016. If it breaks out behind $250, it may be poised for a run to $300, says one market technician. Meanwhile, Intel appears to be riding a surge of institutional buying that may propel its price further upward. (For more, see also: These 3 Chipmakers May Soar: A Technical View.)

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