Chip stocks have had a strange run of things lately. First there was the chip shortage that made every chip maker look like a gold miner. Then there was the hit to consumer confidence that suggested chips were on their way out. Now, chip stocks are mostly up today—with some exceptions—as earnings reports emerge and suggest the chip field may not be so badly hurt after all.
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Gains large and small emerged throughout the sector. For instance, Applied Optoelectronics (NASDAQ:AAOI) blasted up over 64% in Friday afternoon’s trading. Few others could produce a match, but several were up overall. Cirrus Logic (NASDAQ:CRUS), for example, added over 5.7%, while Qualys (NASDAQ:QLYS) gained just over 3%. Meanwhile, Synaptics (NASDAQ:SYNA) notched up just 0.19% in Friday’s trading. The gains weren’t universal; Microchip (NASDAQ:MCHP) lost 6.26% in the session where so many of its contemporaries gained at least something.
Of course, Applied Optoelectronics had a bit of an edge. It got a bit of support in an analyst upgrade from B.Riley Securities, whose analysts pointed out that its new 400G supply agreement with Microsoft (NASDAQ:MSFT) could represent as much as $300 million over the next three years alone. That was enough for B. Riley to kick Applied Optoelectronics up from “neutral” to Buy, as demand was clearly on an uptrend. Being able to serve as a Microsoft supplier offers plenty of extra weight in sales presentations to smaller firms, after all; if you can supply Microsoft, it’s a safe bet you can supply Ma & Pa Electronics of Podunk.
Interestingly, the highs and lows from today are actually reversed in potential. Both Applied Optoelectronics and Microchip are considered Moderate Buys by analyst consensus. However, Applied Optoelectronics comes with a 1.01% downside risk on its $10.75 average price target. Meanwhile, Microchip offers the best upside potential of all five with a 13.37% upside potential on an average price target of $95.14.
