Semis stocks are coming off their best week in a year.
The SMH semiconductor ETF — which tracks major names such as AMD, Nvidia and Intel — closed last week up roughly 9%. That was its best weekly gain since last November. The ETF added another 1.5% on Monday. More than half that ETF hit 52-week highs either Friday or Monday.
A better-than-expected quarter for Qualcomm and bets on the metaverse after Facebook's rebranding helped to lift the entire group.
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"What these charts are basically telling us is they're showing you the picture of how strong the fundamentals are ... You're breaking out to new highs," Craig Johnson, chief market technician at Piper Sandler, told CNBC's "Trading Nation" on Friday.
Johnson says the SMH ETF looks to be at the midpoint of a "long-term upward trending channel," suggesting there's more upside to go. Shares are up 345% over the past five years, for example; over the same stretch, the S&P 500 has risen 125%.
"If I was to drill down into one stock that's standing out right now, we do own Nvidia — it's been on a great run, it's a little bit too strong for me to step back and buy that one right now — but take a look at Broadcom," said Johnson.
"It's just starting to break out of a nice multi-month consolidation, looks like it's at a pretty good entry point, and it's one I think should be bought for those that are looking to add more semiconductor exposure to their holdings," he said.
Broadcom shares have climbed 28% this year, better than the broader market's performance but falling shy of a 37% run for the SMH ETF.
John Petrides, portfolio manager at Tocqueville Asset Management, agrees with Johnson that the group is likely to see more gains ahead. He says rising interest rates could continue to put pressure on tech stocks broadly but that he expects semiconductors to weather much of the pain.
"When you look at the bottom-up fundamentals, the themes for the chips are really quite strong," Petrides said during the same interview. "5G, artificial intelligence, augmented reality, the metaverse, electronic vehicles, cryptocurrency — there's so much end-market demand that's where a lot of capital is flowing, to where these guys sit, right in the catbird seat."