It's no secret anymore: The semiconductor industry is in the midst of one of the most adrenaline-packed rebounds any business sector has ever seen.
When Intel (NASDAQ:INTC) blew its own guidance out of the water Thursday night, it was merely the final piece of evidence of a trend that has been pretty darn obvious for months. Chip designers (silicon, not potato) are back in business after a disastrous downturn in 2008 and 2009, and many are back in the business of chasing all-time sales and production records instead of just treading water.
For the record, Intel's fourth quarter included 28% year-over-year sales growth, the fattest gross margins in the company's history, and nearly 10 times the net earnings seen a year ago.
Adding fuel to the fire, the combined figures from independent market researchers Gartner and IDC’s fourth-quarter reports show a 25% annual improvement in unit shipments of personal computers in the United States. Hewlett-Packard (NYSE:HPQ) cemented its status as the market leader as Dell (NASDAQ:DELL) continued its slide in 2009, while Toshiba stole a march on Apple (NASDAQ:AAPL) and is now the fourth-largest systems seller in America. Acer stayed steady at No. 3. But even Dell, whose market share slipped considerably, is enjoying higher sales than it did at the end of 2008.
And the usual suspects of Wall Street generally agree that chip stocks make up a hot sector right now. Broadpoint AmTech analyst Doug Freedman rates both Intel and Advanced Micro Devices (NYSE:AMD) as buys, calling Intel "one of the best values in semis." (Chips, not trucks. Keep it straight, will you?)
Elsewhere, JPMorgan Chase analyst Chris Danely casts a bit more of a dour note. He believes Texas Instruments (NYSE:TXN) is not quite as attractive as other chip stocks, because the company got caught upgrading its internal manufacturing plants at an inopportune time.
Overall, Danely notes that the chip sector as a whole will probably end up making too many chips, overcorrecting to stay ahead of renewed end-market demand. And he sees some sector consolidation coming down the line as financing is possible once again and business results are back to normal. I've got a hunch on what Mr. Danely is talking about here. NVIDIA (NASDAQ:NVDA) to Intel doesn't have quite the ring of Montana to Rice, but the connections are just as obvious.
Right now, it's harder to find clunkers and easier to find fine investment opportunities in the semiconductor sector. What's your favorite chip stock? Share the wealth in the comments box below.
