What happened
Semiconductor stocks exploded higher on Tuesday afternoon, riding a rising tide of positive market sentiment as the stock market responded to news of an apparent Russian troop pullback from Ukraine -- and the potential that war in Eastern Europe can be averted.
As of 3:30 p.m. ET, shares of Qualcomm (QCOM 1.41%) had risen 4.8%, Advanced Micro Devices (AMD -0.35%) was up 6.1%, and Micron (MU -0.60%) had gained most of all -- up 7.1%.
Image source: Getty Images.
So what
Positive news out of Moscow appears to be the primary catalyst moving stocks higher today, but it wasn't the only good news for investors in tech stocks in general, or semiconductor stocks in particular.
In an interview on Yahoo Finance Live today, AMD CEO Dr. Lisa Su predicted that despite "tremendous investment that's happening across the semiconductor industry" aimed at alleviating the global semiconductor shortage that's been impeding growth all around the world the past couple of years, "the first half of this year will continue to be quite tight" as far as semiconductor supplies go. This implies that those semiconductors that companies can bring to market will continue to produce powerful profit margins for their makers -- companies like AMD, Qualcomm, and Micron -- as they benefit from strong pricing dynamics.
Dr. Su does believe that "things will get a little bit better," supply wise, toward "the second half of this year." But even so, the AMD CEO doesn't see the supply crunch ending entirely in 2022.
Now what
So what does this mean for investors? For the next four reported quarters at least, AMD's CEO seems to be predicting strong profits growth for semiconductor companies -- and analysts appear to agree with her on this point.
The consensus of semiconductor analysts is that 2022 will see 39% profits growth at Qualcomm even if revenue rises only 27%. The situation for Micron shareholders looks even brighter, with analysts forecasting that a mere 16% growth in revenue will translate into astounding 48% growth in profits this year.
As for AMD itself, the Street predicts 57% growth in revenue, but only 42% growth in profits. And yes, ideally, it would be better to see profits growing faster than sales at AMD as well. Still, 42% profits growth is nothing to sneeze at, however it comes about. With AMD stock selling for only 44.5 times trailing earnings -- and barely 28 times forward earnings -- the future looks pretty bright for this stock's performance as well.
