Monday, May 25th, 2020

Will Semiconductor Stocks Rise in the Trump Presidency?


The initial respond to Trumps election as president was a near crash of the market followed by a rally. Semiconductor stocks seem to be doing well also. Is this a matter of a rising tide lifting all ships? These cyclical stocks tend to rise and fall with the economy. But will semiconductor stocks rise in the Trump presidency for other reasons? CNBC considers stocks that could soar in this rising market.

Semiconductors are considered cyclical stocks, meaning they rise as the market rallies and drop as it dips, due to their use in so many electronic devices. Yet beyond the general updraft in stocks, there may be another reason why they’ve been rising recently.

Some say that under a Donald Trump administration, loosening of regulation may lead to revved-up merger and acquisition activity.

“The industry is looking for further consolidation, and the current structure of regulation didn’t allow all that consolidation to occur this year,” Nicholas Colas, chief market strategist at Convergex, said Friday on CNBC’s “Trading Nation.”

Takeovers may or may not create value for stock holders but they often do result in at least temporary escalations in stock prices for the takeover target. This year Nvidia is up 183% and Qualcomm is up 35%. Chip makers are sort of the picks and shovels of the tech industry. Rather than betting on other tech aspects, investors can invest in the workhorses that underpin the tech world. Are there other reasons to see semiconductor stocks rise in the Trump presidency?

Bargains or Overbought?

Another semiconductor stock that has done well this year is Advanced Micro Devices, AMD. The stock is up 228% in a year in which it has lost half a billion dollars. The company is always “second fiddle” in Intel but has focused more and more on profitable niches.  Motley Fool looks at this interesting semiconductor stock.

Advanced Micro Devices deserves credit for shifting its business toward important areas in the semiconductor market, but its soaring stock price also makes AMD shares look overvalued today.

Advanced Micro Devices occupies something of a precarious place in the eyes of many longtime semiconductor sector observers. Long the distant second fiddle to Intel in the market for the x86 microprocessors that power the PC industry,  AMD has struggled to maintain consistent profitability since the turn of the millennium, which has had disastrous results for its volatile stock price over the long term.

By focusing on graphic intensive computing tasks like virtual reality, high end video games, self-driving cars and big-data imaging AMD has maintained a profitable niche as the more profitable choice for chips in this area. The problem for whether this semiconductor stock will rise in the next months is being already overprices according to some analysts. These stocks would seem to be good targets for options trading as they hold the potential for further growth and the possibility of falling in price if the market starts to frown on them. As always do your own homework before trading options on any stock.

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