The Semiconductors Take Center Stage

By Spencer Israel

Earnings season is in full swing, and there are a lot of big names—Apple, Beyond Meat, Pfizer, Twilio, Exxon Mobil, to name a few—reporting this week. But make no mistake: this week belongs to the semiconductors.

In fact, this entire year pretty much belongs to the semis. Somehow, despite very little tangible progress being made on the U.S.-China trade war front and Huawei’s blacklisting, the Philadelphia Semiconductor Index is up about 41% year-to-date. That number is impressive, but even more so considering China accounted for 35% of global semiconductor sales in 2018, according to Evercore ISI.

And though there are some clear laggards—NVIDIA, Taiwan Semiconductor, Broadcom, and Intel are down an average of 6% since May—four of the 10 best-performing non-leveraged equity ETFs of 2019 are semiconductor-specific. The best among them, the SPDR S&P Semiconductor ETF (XSD), is up 46%.

The major U.S. semis to have already reported—Intel, Xilinx, and Texas Instruments—have all beaten analyst estimates on the top and bottom line. This week, we’ll find out if that trend continues.

Monday Afternoon:

NXP Semiconductors (NXPI)

  • EPS estimate: $1.78 per share
  • Revenue estimate: $2.2 billion

Tuesday Afternoon:

Advanced Micro Devices (AMD)

  • EPS estimate: $0.08 per share
  • Revenue estimate: $1.53 billion

Wednesday Afternoon:

Qualcomm (QCOM)

  • EPS estimate: $0.75 per share
  • Revenue estimate: $5.08 billion

Lam Research (LRCX)

  • EPS estimate: $3.42 per share
  • Revenue estimate: $2.36 billion

The big gun here is AMD. Up 82%, AMD is the best performing S&P 500 stock of the year. Investors are likely banking on their second-half pipeline, as the company is rolling out multiple processors and GPUs (specifically a 16-core 7nm gaming CPU) that are expected to give the company a presence in the high-end GPU market and boost their Computing And Graphics unit.

What matters most for investors now is what these companies guide for the rest of the year and whether they provide commentary on the trade war. With the continued growth of the cloud computing, 5G, and internet-of-things markets, coupled with recovering smartphone demand, the reliance on semiconductors is only going to continue to grow. The biggest challenge will be weathering the storms in the meantime.

As Evercore acknowledged in a recent note, “a simple tweet could upend everything.”

The author is long AMD, NVIDIA, and Intel in his 401(k)

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