Hot Chips

Our overweight position in Information Technology got another boost today from semiconductor stocks. Taiwan Semiconductor Manufacturing Company, the world’s largest contract chipmaker posted better-than-expected profit and revenue. This confirms that the post-pandemic recession for semiconductors is over. The S&P 500 Semiconductors stock price index jumped to another record high (chart). It is back to the pre-pandemic uptrend. The industry's forward earnings is at a record high too. The forward P/E is also high at 25, up from 15 in early October 2022. Chips aren't cheap, but they are hot.

Semiconductor manufacturers worldwide sales and US industrial production of chips bottomed along with S&P 500 Semiconductor forward earnings in early 2023 and have been recovering since then(chart).