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Semiconductor shortage a boon for chipmakers like Micron: veteran tech investor

Julie Hyman
·2-min read

Semiconductor stocks have been swept up in the current tech stock sell-off, but don't count them out.

One ETF (SOXX) that tracks semiconductors pulled back more than 5% from a recent record high. There's the general concern that tech shares will continue to be pressured by rising interest rates and a rotation into stocks of companies that have more to gain from economic reopening. On top of that, for chipmakers there's the added pressure of a semiconductor shortage that has been pressuring manufacturers and their clients alike, causing bottlenecks in everything from carmakers to gaming-console companies.

One veteran tech investor, though, said the shortage has a silver lining: It's making prices rise, a good thing for some semiconductor makers like Micron (MU). Spot prices of one type of NAND memory chip have returned to their pre-pandemic level, according to prices tracked by Bloomberg.

"With commodity chips, I love my pricing," said Paul Meeks, a portfolio manager at Independent Solutions Wealth Management, in an interview with Yahoo Finance Live. "The pricing, which has been booming, is of much more interest to me as a bullish factor than the fact that they're supply constrained, which obviously is at least a modest bearish factor."

DRAM chips are pictured inside an office in Taipei March 5, 2009. Taiwan will set up a new DRAM company with a government stake and involving Japan's Elpida or U.S.'s Micron as it seeks to overhaul the struggling sector, the economics minister said on Thursday.   REUTERS/Nicky Loh (TAIWAN)
DRAM chips are pictured. REUTERS/Nicky Loh (TAIWAN)

There's also the question of demand. This week, Micron (Meeks' favored pick in the sector) raised its revenue forecast for this quarter on demand for chips powering computers and phones. Meeks thinks the stock can double within the next couple of years. He also likes playing the semiconductor theme through chip-equipment makers, including Applied Materials and KLA-Tencor.

Meeks first came to prominence in the 1999 tech stock boom, when he was a highly sought-after fund manager at Merrill Lynch whose portfolios collapsed in the ensuing bust. This time around, he's being choosy.

"You have to really be a rifle shooter, not a shotgun shooter. Find these companies that do have some valuation support, they do generate earnings, they do generate cash flow, they didn't just come to the dance through the work from home thesis," Meeks said. "And I don't know how long and how deep this tech correction lasts, but I actually think we're going to set up for a real nice move in some of these when it's all over."

Julie Hyman is the co-anchor of Yahoo Finance Live, weekdays 9am-11am ET.

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