General Motors is the latest company to sound the alarm on a chip shortage, warning it could reduce full year earnings by up to $2 billion.
And it’s not the only one – Ford, solar company Enphase, Xbox maker Microsoft and PlayStation parent Sony are also feeling the semiconductor squeeze.
On the other side of the supply chain, some of the top chipmaker stocks could benefit from increased demand and pricing power.
This is the semiconductor stocks’ time to shine, according to Todd Gordon, founder of TradingAnalysis.com.
“I’ve been overly bullish for years and I continue to be,” Gordon told CNBC’s “Trading Nation” on Wednesday. “I think we’re literally in the next tech boom – 5G, Internet of Things, smart homes, self-driving cars, virtual reality. There’s so many things that chips need to go into, and the demand is going to continue to explode.”
Gordon said Nvidia, in particular, shows a promising trend.
“I love the technical setup, looks like if we can get above $600, we actually don’t have … resistance until about $1,000,” said Gordon, who holds shares in the company.
Nvidia closed Wednesday below $591. A move to $1,000 implies 69% upside.
Quint Tatro, president of Joule Financial, told CNBC the chips shortage is an overall bullish sign for the economy. However, he warns that semis stocks may have already enjoyed that boost.
“We’re starting to see an economic rebound, we’re seeing pent-up demand, and that’s very exciting, but unfortunately, many of these stocks have sort of priced that in,” Tatro said during the same interview.
Applied Materials is one stock Tatro likes but says may have run up too far. It has rallied 189% since March lows and trades at 20 times forward earnings versus less than 15 times in November.
“Investors can kind of make note of this, kind of write these names down, and then during a corrective phase this is where you want to look because the demand is strong and it will continue,” he said.
Disclosure: Gordon holds NVDA.
