Chip Stocks Are Now a Popular Buy

Nearly every manufacturer in the world—from cars and trucks to refrigerators and videogame consoles—has desperately sought semiconductors. And investors have wanted semiconductor stocks as a result.

That intense global demand for chips could weaken next year as the pandemic eases and supply chains catch up from shortages. While the timing is still a matter of debate, 2021’s run-up in semiconductor stocks makes it an opportune moment to shed the most expensive names and seek out cheaper alternatives.

For the year to date, the PHLX Semiconductor Index, or SOX, is up 43%, handily outpacing the Nasdaq Composite‘s 23% gain. The SOX is now trading at 7.9 times estimated next 12 months sales—more than double its historical 10-year average.

Barron’s looked for the cheapest stocks among the 30 constituents of the SOX, based on price to estimated 2022 earnings. Click here to sign up for Barron’s news to continue reading on Chip Stock.

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