Chip Stocks On the Move: AMD, Nvidia, Xilinx, Rambus And More

The chip space came under selling pressure in early June, triggering fears of a tech melt down. However, putting the selling pressure in context, the pullback came after a strong rally that began early 2016.

Between 2016 and the start of June, the PHLX Semiconductor index has gained about 65 percent. The breadth of the sell-off was so much so that most high-profile tech names, spanning across the tech sub-sectors and including the likes of Alphabet Inc GOOG GOOGL, Facebook Inc FB and Amazon.com, Inc. AMZN, weren't spared either.

The prime reason behind the weakness was investor worries over the valuation of tech stocks, which conjured up the possibility of a scenario similar to the dotcom bubble burst in the late 1990s.

^SOX Source: Y Charts

However, come July, investor sentiment toward the space has changed, probably on the notion that the sell-off is overdone and the pullback might be presenting an opportunity to build positions in the space ahead of the tech earnings.

The stocks also received a shot in the arm from a report by the Semiconductor Industry Association, which said global semiconductor sales rose 22.6 percent in July, the strongest annual growth pace since September 2010.

Another reason for the buoyancy seen in the space could be the fact that smartphones of today use several chips per phone, as highlighted by a recent Wall Street Journal article. Despite the flattening sales, smartphones, which are seen as a collection of processors and memory wedded tightly to a high-definition touch screen, has kick-started chip sales in a big way.

Apart from in-house chips made by manufacturers such as Apple Inc. AAPL and Samsung Electronic SSNLF, Intel, QUALCOMM, Inc. QCOM and Broadcom Ltd AVGO are seen as big beneficiaries of this trend.

In pre-market trading on Monday, most chipmakers are continuing with the recovery seen since July 3. The Philadelphia Semiconductor Index bottomed out on July 3 and has been largely higher since then.

Some of the prominent stocks moving in pre-market include:

• Advanced Micro Devices, Inc. AMD: Up 1.42 percent to $13.55.
• NVIDIA Corporation NVDA: Up 1.73 percent to $149.31.
• Rambus Inc. RMBS: Up 1.61 percent to $12.65.
• Xilinx, Inc. XLNX: Up 2.13 percent to $66.74.

However, Intel Corporation INTC is bucking the uptrend with a 1.71 percent move to the downside to $33.30 in pre-market trading on a Jeffries downgrade of the stock.

Another reason for the sector movement could be a substantial Jefferies analyst note on the sector out Monday as well.

The upcoming reporting season could give a clear direction to which way these stocks are headed.

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