Though Their Stocks Have Cooled, The Semiconductor Industry Is As Hot As Ever

The markets hate uncertainty, and there is more than enough of that to go around right now. But while near-term prospects might look hazy, traders can always take the long view and look towards the industry that is literally building the future: semiconductors.

One of the most reliable industries for outperformance in recent years has been the semiconductors. Stocks like NVIDIA Corporation NVDA and Micron Technology, Inc. MU have been on years-long tears as investors have flooded the space with cash.

But this trend has slowed down in 2018. The following chart shows the year-to-date performance of the top 10 components in Direxion’s Daily Semiconductor Bull 3x SOXL and Daily Semiconductor Bear 3x SOXS ETFs.

While 2018 leaves a little to be desired, demand for these products certainly do not—even the stock performance isn’t there.

Strong balance sheets and consistent demand for discrete processors and GPUs across the board has kept the likes of Micron and semi-behemoth NVIDIA trucking past the rest of the market, both posting top and bottom line revenue results for seven consecutive quarters. Other companies like Intel and Qualcomm, whose processor sales rely mainly on the sales figures of PCs and devices they’re included in, have also surged ahead as market leaders. Intel Corporation INTC posted record annual revenue over the course of  2017 and both Intel and Qualcomm remain leading candidates in the M&A game despite the block of latter’s deal with Broadcom Ltd. AVGO.

One major segment of the semi market that has lately received increased attention is PC and console gaming, particularly with regard to the rise of E-sports. While the professional E-sports scene has been huge in east Asia for years, rivaling the superbowl in terms of average viewership, the competitive gaming world has attracted more attention in the U.S. and as of late. This has kept kept demand up for consoles like Nintendo’s Switch, which uses Nvidia’s Tegra portable gpu and in its first year has become one of the best selling video game consoles ever.

Another segment pushing industry demand (and even eating its own lunch) is the still booming crypto mining market. Despite sizable drops in the price of most all digital currencies, the demand for mining rigs capable of processing enough raw data to earn freshly minted coin remains high. How high? Enough to drive the price of some processing units up 200 percent or more.

Then, of course, there is demand for smaller and faster processors in everything from autonomous vehicle operating systems to virtual and augmented reality devices to...well, basically everything.