What happened
Several makers of semiconductor manufacturing tools soared in September 2017, according to data from S&P Global Market Intelligence. Ichor Holdings (ICHR 1.76%) rose 17.1%, Semiconductor Manufacturing International (SMI +0.00%) gained 17.8%, and Ultra Clean Holdings (UCTT +1.50%) jumped 32.7% higher. None of these companies had much news of their own to lean on last month. Instead, they rode on the back of strengthening trends in the chip industry as a whole, capped by some significant good news from two large customers -- memory chipmaker Micron Technology (MU +0.21%) and equipment maker Applied Materials (AMAT 0.85%).
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So what
Several end-user markets that have been causing trouble for technology stocks in recent quarters showed signs of improvement throughout September. Consumers embraced the next generation of flagship smartphones with open arms, cloud computing and artificial intelligence continued to provide a solid growth base for all sorts of related hardware, and chip-based solid state storage devices stole some more market share from traditional magnetic-platter hard drives. All of these broad market trends were good news for chip stocks in general, and semiconductor manufacturing specialists rode their coattails.
Then, Micron Technology crushed Wall Street's targets in a strong fourth-quarter report. The next day, Applied Materials held a successful analyst day, boosting its share buyback program and sending the industry watchers home with a sense that the chip-building sector is due for a serious upswing.
In the span of those two days, Micron shares raced 11% higher and Applied Materials gained 10%. The chip tools experts followed suit, ranging from Semiconductor Manufacturing's 7% gain to Ultra Clean Technologies' 13% jump.
Now what
The chip tools industry is a tight-lipped bunch, and some of these companies avoid disclosing the identity of their largest clients. But Applied Materials does show up among the two largest customers for both fluid delivery specialist Ichor and robotics giant Ultra Clean Technologies. In turn, Micron is one of Applied Materials' largest clients so what's good for the memory goose is also great for the chip tools gander.
So all of these big gains fit together like pieces of the same puzzle. Taken together, this group of surging stocks is good tidings for the chip sector as a whole and -- on an even larger scale -- insider confidence in a strong global end market for technology goods.
