What Happened?
A number of stocks jumped in the afternoon session after President Trump announced Apple had agreed to design and manufacture chips with Intel in the United States, a foundry validation the market had been waiting on for over a year.
The deal served as a direct catalyst for Intel and lifted sentiment across the industry. Micron also added 7-8% after a coordinated wave of analyst price target hikes. Stifel, Wedbush, Deutsche Bank, and TD Cowen revised their models sharply higher reinforced by Apple CEO Tim Cook's acknowledgement that memory price increases have become unavoidable.
The macro backdrop also helped. The US and Iran released the text of a signed interim agreement extending the April ceasefire by 60 days, a development that Art Hogan of B Riley Wealth described as "usurping any negative sentiment brought about by a more hawkish Fed yesterday." Lower oil prices eased the inflation pressure that sent the market lower earlier in the week; for a sector carrying high multiples that compress when the risk-free rate rises, any relief on the rate-hike narrative matters.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Semiconductor Manufacturing company Entegris (NASDAQ: ENTG) jumped 9.1%. Is now the time to buy Entegris? Access our full analysis report here, it’s free.
- Analog Semiconductors company Monolithic Power Systems (NASDAQ: MPWR) jumped 6.5%. Is now the time to buy Monolithic Power Systems? Access our full analysis report here, it’s free.
- Semiconductor Manufacturing company Photronics (NASDAQ: PLAB) jumped 7.2%. Is now the time to buy Photronics? Access our full analysis report here, it’s free.
Zooming In On Entegris (ENTG)
Entegris’s shares are extremely volatile and have had 38 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 2 days ago when the stock dropped 5.6% on the news that chip stocks sold off in a session that laid bare the structural tension building beneath the sector's recent rally.
Bank of America's fund manager survey, released in the morning, showed that 80% of respondents viewed semiconductors as the most crowded trade, the highest reading in the survey's history. When that many professional investors are simultaneously aware they are overweight the same position, the incentive to move first is powerful.
The exit had additional urgency from two macro reads. May import prices came in at 1.9%, nearly double the 1.1% consensus, with an annual gain of 6.7%, the largest since August 2022. The data complicated the narrative that the Iran peace deal had resolved the inflation problem. The market was also anticipating Kevin Warsh's first meeting as Federal Reserve Chair, with some fund managers expecting a hawkish hold.
Entegris is up 96.2% since the beginning of the year, and at $175.76 per share, it has set a new 52-week high. Investors who bought $1,000 worth of Entegris’s shares 5 years ago would now be looking at an investment worth $1,499.
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