The worldwide semiconductor market will reach $401.4B this year, according to research firm Gartner.
The amount represents a 16.8% growth from the prior year and the first time the market has totaled more than $400B.
Gartner research vice president Andrew Norwood attributes the growth to a memory shortage that has allowed vendors to increase DRAM and NAND pricing, which in turn increases revenue and margins.
The expected 52% revenue growth in the memory market could push Samsung (OTC:SSNNF, OTC:SSNLF), the world’s largest memory provider, to the top of the market. Intel (NASDAQ:INTC) has held the top slot since 1992.
Investors should trade tech stocks ahead of a potential underperformance, warns Larry McDonald in his Bear Traps Report, per CNBC.
"Getting out in front of the rotation is more important than valuation – as capital flows out of highly concentrated trades it has to go somewhere in a bull market. It's a growth into value tsunami," McDonald writes about tech stocks.
The strategist also notes that the volatility measures for the S&P 500 and the Nasdaq 100 have spread to the largest difference since 2004, but the gap should close shortly.
McDonald attributes the gap to investors moving away from growth stocks in favor of value stocks.
Tech stocks have experienced recent pullbacks including the high profile FAANG stocks: Facebook, Apple, Amazon, Netflix, and Alphabet (Google).
Semiconductors took a rough hit but have started to rebound. The Philadelphia Semiconductor Index is up 2.13%.
Evercore ISI Rich Ross puts semiconductors at Sell as he sees trading similarities between the Philadelphia Semiconductor Index and cryptocurrency Bitcoin, per CNBC.
"I reiterate my sell call on Semi's and continue to see a test of 1,000 on the SOX (-8 percent) as the group continues to display the textbook signs of a reversal in trend and a technical symmetry with Bitcoin, which is down -9% overnight and poised for another -17% to 2,044," writes Ross.
Meanwhile in the large-cap names, Goldman's Robert Boroujerdi says the one-way direction (up) is leading investors to underestimate risks. He notes that if FAAMG were its own sector, it would have lower realized volatility than consumer staples and utilities.
Apple (AAPL -3.4%), Facebook (FB -2.6%), Google (GOOG -2.5%), (GOOGL -2.6%), Amazon (AMZN -2.1%), Microsoft (MSFT -2.6%), and Netflix (NFLX -4%) (for FAANG fans).
The Nasdaq is down 1.4% vs. the S&P 500 flat, and the Dow modestly in the green.
A fancy valuation combined with industry growth set to peak in June was enough for Credit Suisse's John Pitzer to downgrade ON Semi, which was down as much as 7%, but has rebounded to a 4% loss.
Then here's Dialog Semiconductor which crumbled in German trade on worry it might lose a crucial supplier deal with Apple. That's leaking over into Cirrus Logic (CRUS -3.8%), where Apple accounted for about 85% of company revenue in a recent quarter.
Other sizable Apple vendors include Micron (MU -2.7%), Qualcomm (QCOM -2.2%), and Analog Devices (ADI -2.1%).