Cooler than a Bag of Chips

Chip stocks have drastically outperformed the general market over the past six months as equities as a whole have recovered. For example, Nvidia (NVDA - Free Report) , the most widely followed chip stock, is up 86%, while the S&P 500 Index is flat during the same period.

Nvidia is not alone. The Vaneck Semiconductor ETF (SMH - Free Report) , the most liquid semiconductor proxy, is higher by 13%. What is driving the semiconductor space higher?

·      Increased demand for semiconductors: Crypto mining, cloud computing, artificial intelligence, and gaming are driving the demand.

·      Semi shortages: Amidst the strong demand, the semi space is experiencing global shortages due to pandemic-related disruptions. Because of this, leading semiconductor manufacturers can charge higher prices and drive EPS.

·      Positive Earnings Reactions: Chip makers like Nvidia and Mobileye (MBLY - Free Report) have performed well post-EPS.

Now, amidst the market volatility caused by the demise of Silicon Valley Bank , chip stocks are outperforming. Below are 3 of the strongest chip stocks giving investors another chance to pick up shares:

1.   Zacks Rank #2 stock (Buy) Impinj (PI - Free Report) has been one of the strongest stocks over the past year in terms of both fundamentals and price action. Impinj is best known for its innovative RFID tags that help companies such as Delta Airlines (DAL) track luggage via a tiny, inexpensive chip. For Delta, the technology has meant fewer lost bags and more satisfied customers. Impinj’s product is catching on and translating to robust earnings. In 19 out of the past 20 quarters, Impinj has produced positive earnings surprises versus Zacks Consensus Estimates.

Not only is the company providing consistent earnings, the technical picture offers investors a clear trend. PI is testing its 50-day moving average – an area that the stock has not closed decisively below all year.

2.   Zacks Rank #3 stock (Hold) Rambus (RMBS - Free Report) designs and develops chip interface technology for the computing, graphics and gaming industries. Though Rambus only has a Zacks Rank of hold, Zacks rates the stock an “A” from a growth perspective. Over the past seven quarters, revenues have grown at a healthy double-digit pace. Currently, the stock is pulling into its 50-day moving average. The last time shares tested the 50-day moving average was in December, when investors were rewarded with returns of 24% over the next few weeks.

3.   New Zacks Rank #1 (Strong Buy) stock Microchip Technology (MCHP - Free Report) develops and manufactures microcontrollers, memory, and interface products for embedded control systems, which are small, low-power computers designed to perform specific tasks. Over the past four quarters, Microchip has provided investors with double digit top and bottom-line growth. Looking forward, most analysts agree that earnings will remain strong.

Bottom Line

Amidst the problems in the banking and finance sector, chip stocks have performed well. Earnings remain strong, and the technical areas in the stocks mentioned above provide investors with an attractive risk-to-reward proposition.

5 Stocks Set to Double

Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

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