Chip makers had a strong trading session Thursday, as a global semiconductor shortage is allowing chip makers to essentially sell everything they can crank out.
The benchmark PHLX Semiconductor index, or Sox, advanced 1.9%, as Qualcomm (ticker: QCOM) soared 6% to $150.99, and AMD (AMD), advanced 5.1% to $102.95, a record high. Several auto semiconductor manufacturers such as On Semiconductor (ON) and NXP Semiconductors (NXPI) also saw their share prices climb briskly.
Heading into June-quarter earnings, investors widely expected chip companies to outperform analyst estimates, and issue bullish guidance for the coming quarters.
Qualcomm made investors smile when it reported expectation-topping earnings late Wednesday. The company is widely known for its mobile processors, but also makes chips destined for internet of things devices, and for auto makers—two segments that grew revenue by 83% apiece in the fiscal-third quarter.
Executives in the earnings call said the company would have been able to report even better results if it could secure more manufacturing capacity. The company said it is working to acquire it.
Evercore ISI analyst C.J. Muse wrote late Wednesday that the company’s emphasis in its earnings call and remarks on its non-smartphone businesses suggest that under new chief executive Cristiano Amon, Qualcomm is trying to establish itself beyond its historic stronghold of mobile chips. Muse called the quarter solid, and retained his $150 target price and a Tactical Outperform rating.
Wells Fargo analyst Gary Mobley wrote in a note that despite Qualcomm’s strong quarter, he is reluctant to boost his rating on shares just yet. Still, Mobley pointed to the rollout of 5G products as a reason for optimism. As more people adopt next-generation, 5G phones, Qualcomm will sell more chips. Mobley rates Qualcomm Equal Weight, with a $155 target price.
After Qualcomm’s comments, and remarks from Ford (F) about the lessening impact of the shortage, auto chip makers rallied Thursday too. On Semiconductor advanced 4.2% to $38.61, NXP Semiconductors rose 2.9% to $204.27, and Analog Devices gained 1.5% to $166.54. Texas Instruments gained 1.6% to $189.93, and memory maker Micron Technology rose 2% to $77.08.
Shares of AMD rallied Thursday too, after Xilinx (XLNX) reported earnings late Wednesday. In a deal that would help reshape the semiconductor industry, AMD’s Lisa Su announced a plan to acquire Xilinx for $35 billion last year. Amid consolidation in the chip industry, Su has said the Xilinx deal will transform AMD and is the natural evolution of a partnership that has existed for years.
Amid the chip shortage, Xilinx reported Wednesday that its July-quarter profit more than doubled on revenue that grew 21% to $879 million. Xilinx executives said that demand for the company’s products remains strong, despite the challenging supply environment.
Not every chip company had a strong Thursday. Lam Research (LRCX) topped $4 billion in quarterly sales amid the shortage, but it wasn’t enough to please investors. Some analysts said that the company’s outlook suggested there were risks ahead because the chip supply chain issued could eat into its margins. Lam stock fell 2.4% to close at $619.63.
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