Chip-Gear Stocks Surge On Taiwan Semiconductor Spending Plans

Semiconductor equipment stocks surged higher on Thursday after the world’s leading chip foundry, Taiwan Semiconductor Manufacturing Co. (TSM), announced plans to ramp up factory investments. Several chip-gear stocks broke out on the news, including ENTG stock, KLAC stock and LRCX stock.




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Taiwan Semiconductor, also known as TSMC, said it plans to spend $100 billion over the next three years to increase capacity at its plants, Reuters reported. The news comes just days after Intel (INTC) revealed a $20 billion plan to expand its advanced chipmaking capacity.

TSMC previously said it planned to spend $25 billion to $28 billion this year on advanced semiconductor manufacturing equipment. The company is currently facing a large backlog of chip orders from fabless semiconductor companies. Its customers include Apple (AAPL), Advanced Micro Devices (AMD), Nvidia (NVDA) and more.

Three semiconductor equipment stocks broke out of bases on Thursday, according to IBD MarketSmith charts. They are Entegris (ENTG), KLA (KLAC) and Lam Research (LRCX).

ENTG Stock, KLAC Stock, LRCX Stock Break Out

ENTG stock broke out of a 10-week consolidation period at a buy point of 114.10. KLAC stock surged out of a cup base at a buy point of 342.31. LRCX stock hit a buy point of 603.70 out of a 31-day consolidation.

On the stock market today, ENTG stock rose 7.4% to 120.09. KLAC stock advanced 5.1% to 347.29. LRCX stock increased 7.4% to 639.30.

IBD’s Electronics-Semiconductor Equipment industry group rose 6.4% on Thursday. The chip-gear stock group ranks No. 28 out of 197 industry groups that IBD tracks.

Growth stock investors generally should focus on leading stocks in the top 40 industry groups. Choosing highly rated stocks from leading industry groups in a confirmed stock market uptrend generally increases your chances of making profits in growth stocks.

Evercore ISI analyst C.J. Muse said semiconductor equipment stocks still have room to run. In a note to clients Thursday, he cited increased capital spending plans by chipmakers and rising earnings estimates. Muse also predicted a “decadelong investment cycle ahead as semiconductor manufacturing moves to a strategic national priority in both the U.S. and Europe.”

Muse named ASML (ASML), Applied Materials (AMAT) and LRCX stock as top picks in the group. He raised his price targets on LRCX stock, KLAC stock as well as for ASML and Applied Materials.

IBD Watchlists Include Lam Research, ENTG Stock

IBD’s proprietary stock lists include several semiconductor equipment stocks.

ASML and ENTG stock are on IBD’s flagship growth stock list, the IBD 50. Meanwhile, LRCX stock is on IBD’s prestigious Leaderboard list.

IBD’s Big Cap 20 list includes Applied Materials, ENTG stock, KLAC stock and LRCX stock.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

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