Photographer: Brent Lewin/Bloomberg

Chip Stocks Are on the Verge of Finally Breaking Their Tech Bubble Era Records

Updated on

Chip stocks closed in record territory after this year’s gains pushed the Philadelphia Semiconductor Index beyond levels not seen since the peak of the technology bubble more than 17 years ago.

Fueled by rising demand, record profits and an unprecedented number of mergers, the index of 30 semiconductor and related equipment manufacturers is up 48 percent this year and has doubled since the start of 2016. The group gained 1.1 percent on Tuesday, enough to lift it above the March 2000 record, more than two years after the tech-heavy Nasdaq Composite Index topped its bubble-era peak.

“It’s hard to be negative on this sector even though it’s had a huge run,” Betsy Van Hees, an analyst with Loop Capital Markets LLC, said in an interview. “You’ve got considerably less competition from consolidation, less pricing pressure and less capacity. So you have a much healthier environment than we’ve had in years.”

Chipmaker shares got a boost Monday when Marvell Technology Group Ltd. announced an agreement to buy Cavium Inc. for about $6 billion in cash and stock. And earlier this month, Broadcom Ltd offered to buy Qualcomm Inc. for $105 billion, which would be the largest technology deal in history. Qualcomm rejected the unsolicited proposal, setting up a proxy battle.

Other companies including Nvidia Corp. and Micron Technology Inc. have also seen huge gains as expanded use of chips drives higher profits. Once mainly confined to computers and phones, the tiny devices are showing up everywhere from washing machines to autonomous driving systems.

“Semiconductors are becoming basically ubiquitous in consumers’ lives,” Van Hees said.

    Before it's here, it's on the Bloomberg Terminal.