These Tech Plays Will Thrive During a FANG Flameout
Trump is talking tariffs again…
But all eyes are on Apple Inc. (NASDAQ:AAPL) as the tech sector attempts to rebound from a bumpy earnings season.
Apple smashed expectations on the top and bottom lines, all raising guidance and selling more than 41 million iPhones during its most recent quarter. The earnings beat is pushing shares to new all-time highs in extended trade, placing the company within striking distance of a $1 trillion market value.
Apple’s strong quarter is a welcome sign for tech bulls who have taken some big hits since last week’s Facebook earnings disaster.
But there’s another mini-rotation happening in tech right now…
While everyone is focused on Apple’s results and Tesla’s upcoming earnings announcement later today, select semiconductor stocks are starting to break out.
You might recall that we dropped our VanEck Vectors Semiconductor ETF (NYSE:SMH) trade back in June after the group went from knocking on the door to new all-time highs to diving below its 200-day moving average. The ETF dropped nearly double-digits in just about three weeks as tech speculators pivoted to software plays.
As SMH started to lag the Nasdaq Composite, we also noted a few ugly failed breakouts in flagship chipmakers such as Intel Corp. (NASDAQ:INTC), Micron Technology (NASDAQ:MU), and NVIDIA Corp. (NASDAQ:NVDA).
While both Intel and Micron continue to struggle, we’re beginning to see other chipmakers find higher ground following strong earnings reports.
Bloomberg notes that the Philadelphia Semiconductor Index has continued to sneak higher as the FANG group retreated.
“KLA-Tencor Corp. (NASDAQ:KLAC) led the group higher Tuesday, climbing as much as 15 percent for the biggest gain in almost three years, after its fourth-quarter results topped the highest expectations,” Bloomberg reports. “The report echoed a theme of strong demand just days after heavyweights like Advanced Micro Devices Inc. (NASDAQ:AMD) and Xilinx Inc. (NASDAQ:XLNX) crushed expectations.”
These breakouts offer us a tremendous opportunity while everyone else is distracted by FANG headlines. That was the case during the first quarter as semiconductors and other tech stocks first started to find their footing following the market correction. When the averages corrected more than 10% from their all-time highs back in the winter, we peeled back the market’s layers to uncover clues that led us to some surprisingly strong trades.
Tech stocks were the first to separate from the pack in early February. The semis busted out of their collective funk to turn positive on the year even as the S&P 500 was still trying to find its footing. Even as the market remained choppy and volatile heading into the spring, the chipmakers were leading the way higher.
Now these stocks have another shot at market leadership as the herd remains focused on the FANGs. Don’t sleep on the semis…