Chip stocks did badly this year , thanks to fears of a recession. The PHLX Semiconductor Sector Index is down nearly 37% year to date. Jeremy Gleeson, a portfolio manager at AXA Investment Managers, told CNBC Pro Talks last week that he’s focused only on firms that have “long-term tailwinds behind them.” The nature of the industry has changed, Gleeson said. “They used to be very highly cyclical,” he said. “If you go back 20 years, semiconductor industries fortunes were almost completely tied in with the PC industry, the computing industry, and some aspects of consumer electronics.” Now, semiconductors are “everywhere,” from PCs and smartphones to industrial applications, Gleeson said. “So, the cyclical nature of semiconductors being tied to just the fortunes of one or two industries, or in markets, has changed quite significantly,” he added. Gleeson, who manages the £1.1 billion ($1.3 billion) tech fund AXA Framlington Global Technology Fund, concedes that 2023 will be a challenging year for the chip industry, with both consumers and businesses set to come under a lot of pressure. But he says he’s confident that the semiconductor industry will “grow quite nicely” in the longer term, and he’s focused on investing in semiconductor firms which benefit from long-term growth opportunities, such as the autos industry. Producing electric vehicles, for instance, involves using a lot more semiconductors, Gleeson noted. Gleeson highlighted some names that are active in the autos industry. One of them is American semiconductor supplier company Onsemi , which is developing products around the silicon carbide market — an important part of the autos industry, according to Gleeson. Another semiconductor firm he likes is U.S.-based Lattice Semiconductor , which is focusing more on the autos industry. Gleeson isn’t the only one who’s optimistic on the chip sector. Several Wall Street pros are also urging investors to take a longer-term view on the sector , given the importance of the semiconductor chip in several key secular trends. Bank of America said in a December note that the next leg of growth for the sector will be led by government spending on renewable energy and carbon neutrality. JPMorgan, for its part, said demand for chips in the cloud, datacenter, telco, enterprise, and auto sectors remain “constructive” in 2023.
