Wednesday, March 14, 2018

PC is back?

Several stocks linked to personal computers (PC) have gained significantly in last 30 days or so:

Micron up whopping 47%
Western Digital up 28%
Intel up 18%

A bit more modest gains for Nvidia (up 7%) and AMD (up 3%).

What's going on here?

In my opinion atleast three tailwinds.

1) Market has revised pricing for Micron, Western Digital and Intel - rightly so.

As I wrote in December Micron, Western Digital and Intel seemed really inexpensive compared to peers and overall market. Especially so when considering how well these companies are positioned in their respective markets and with respect to growing demand for what they each produce.

2) Even though these companies contribute to much wider market, the "death of PC" narrative since iPhone and iPad came out has caused these companies to be priced at discount compared to the more "trendy" technology stocks.

3) Semiconductor sector overall continues to be red hot

The PHLX Semiconductor SOX ETF, which houses 30 chips stocks, has surpassed its record highs of March 2000 and is up nearly 16 percent in 2018. I recommend reading the linked article and watching the embedded video (contains Micron vs. NVIDIA commentary).


To drill a bit deeper to the "PC is back" theme, I would like to quote Jim Cramer from his recent "The personal computer is back" commentary:
 "The action off a return to growth of the PC, the steady burgeoning data center and the gaming business is now too great to ignore. This group is back and it's way too cheap. It's time to buy the breakout, as I believe the numbers are too low and the valuations are just plain out of whack with the rest of the stock market."

PC gaming has been somewhat shadowed by raise of mobile gaming and steady march of the consoles. Now it's raising back to focus thanks to e-sports and hit titles.

I am consuming games over all the mentioned platforms, but I have always liked PC gaming the best. It's the customizability of hardware and software, faster time-to-market of new games and cost of games when compared to console titles.

Disclosure: Author owns shares in Micron, Western Digital and Intel.

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