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Forget SaaS -- These Stocks Are the Nasdaq's New Leaders

By Dan Caplinger - Apr 1, 2021 at 2:46PM

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Everyone's betting on continued success in one key area.

Stocks did well on Thursday, on the last day before a three-day weekend for the stock market. The Nasdaq Composite (^IXIC -2.35%) led the way forward on Wall Street, rising more than 1.5% as of 2 p.m. EDT.

Over the course of the past year, high-growth stocks in the software-as-a-service niche have been among the best performers in the Nasdaq. However, they've slumped recently, and although many of them recovered a bit of ground on Thursday, another sector of the market is starting to take the lead in pushing the Nasdaq back toward its record highs. Below, we'll look more closely at the most prominent stocks in this area to see whether there are still good prospects for investors to grab.

Computer lit up from inside next to keyboard.

Image source: Getty Images.

Big wins for semiconductor stocks

Amid all the gains on the Nasdaq, semiconductor companies really stood out. Among the biggest processor chip makers, NVIDIA (NVDA -4.40%) and Advanced Micro Devices (AMD -4.11%) were both up around 3% on the day. Qualcomm (QCOM -2.72%) picked up 4%.

Companies more closely related to commodity areas like memory chips and similar semiconductor products saw even bigger gains. Applied Materials (AMAT -3.04%) jumped 5%, while Micron Technology (MU -4.27%) weighed in with a 4% rise.

Equipment makers got in on the fun as well. Lam Research (LRCX -2.55%) posted a 6% gain Thursday afternoon. KLA (KLAC -3.25%) saw a 4% rise, while ASML Holding (ASML -1.48%) settled for a 1% rise.

Why chipmakers show no signs of slowing down

Investors in chipmaker stocks have been happy about the almost unprecedented demand for semiconductor products of all kinds. With the pandemic having forced millions of people to leave their offices and work from home, there was a mad race to purchase computer equipment to ensure workers could maintain productivity levels. That in turn created a big shortage in chips as computer manufacturers ramped up production to meet demand.

Now, the broader economy is looking to recover, but in many industries chip shortages are holding back those efforts. Most notably, some major automakers have actually had to curtail car and truck production because they can't get the chips that are necessary to run in-vehicle technology platforms that have become essential for drivers and passengers.

One option in some cases is simply to go without semiconductor chips. That's what Ford (F -3.20%) has done with production of its F-150 pickup truck, as it assembles trucks with the intent of adding in chips later, as soon as they're available. With vehicles now largely relying on technological capabilities not just for operation but also for in-car entertainment and information systems, it's impossible to justify to buyers that featured functionality might not be available.

Researchers suggest that even though the semiconductor industry is cyclical, the upswing in demand could last for quite a while. One figure suggests 10% annual growth lasting at least through 2026, because digitalization efforts spanning across the entire economy aren't likely to slow down.

Watch for further moves

Semiconductor stocks have been mixed over the past six months. Giants like NVIDIA and AMD have been flat to down, while Applied Materials and Micron have surged along with equipment makers.

As long as demand remains strong, though, semiconductor stocks could keep seeing gains. That'd give them leading performance that even formerly high-flying SaaS stocks would be jealous of.

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Stocks Mentioned

NVIDIA Corporation Stock Quote
NVIDIA Corporation
$161.54 (-4.40%) $-7.44
QUALCOMM Incorporated Stock Quote
QUALCOMM Incorporated
$128.53 (-2.72%) $-3.59
ASML Holding N.V. Stock Quote
ASML Holding N.V.
$546.43 (-1.48%) $-8.18
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
$11,264.45 (-2.35%) $-270.83
Ford Motor Company Stock Quote
Ford Motor Company
$12.42 (-3.20%) $0.41
Micron Technology, Inc. Stock Quote
Micron Technology, Inc.
$66.62 (-4.27%) $-2.97
Advanced Micro Devices, Inc. Stock Quote
Advanced Micro Devices, Inc.
$91.16 (-4.11%) $-3.91
Lam Research Corporation Stock Quote
Lam Research Corporation
$470.97 (-2.55%) $-12.33
Applied Materials, Inc. Stock Quote
Applied Materials, Inc.
$106.59 (-3.04%) $-3.34
KLA-Tencor Corporation Stock Quote
KLA-Tencor Corporation
$330.09 (-3.25%) $-11.09

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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