Over the last month, semiconductors have started outperforming as the chip shortage is getting worse. While Nvidia (NASDAQ:NVDA) is up 40%, investors should look at more undervalued stocks like Semtech (NASDAQ:SMTC (NASDAQ:SMTX)), Diodes (NASDAQ:DIOD), and Amkor Technology (NASDAQ:AMKR).One of the major stories over the past couple of months is the semiconductor shortage. This has been a persistent problem for a variety of industries such as computer hardware, automakers, and home appliances.
According to Susquehanna Financial Group, semiconductor lead times have increased to 18 weeks from 13 at the start of the year. Another indication of tight supply is many companies raising prices with the latest example being Taiwan Semiconductor increasing prices by 20%.
While the tight supply conditions of the chip industry have negative implications for many industries, it’s certainly positive for chip stocks. We’ve already seen impressive gains in many names as the VanEck Vectors Semiconductors ETF (SMH) is up 14.5% since mid-May, while one of the leading chip companies - NVIDIA (NVDA) is up by more than 40%. However, going forward I expect some of the laggards in the industry to outperform, such as Semtech (SMTC), Diodes (DIOD), and Amkor Technology (AMKR).