Semiconductor Stocks and Suppliers Power Higher

U.S.-China trade tensions have simmered recently, a potential positive for companies like Applied Materials.


Photo:

Igor Golovniov/Zuma Press

Shares of semiconductor firms and their suppliers posted gains Monday on signs that demand is poised to pick up.

Applied Materials

and

Lam Research


LRCX 4.40%

rose 6.1% and 4.4%, respectively, after

Goldman Sachs

boosted its rating for the two companies and said it had broadly turned positive on companies that make equipment for chipmakers.

That helped push the broader PHLX Semiconductor Index up 2%, even as the S&P 500 ended the day little changed. The semiconductor index is up 35% for the year, while the S&P 500 has gained 19%.

The argument for buying the stocks: Manufacturers are getting rid of excess inventory of memory chips faster than anticipated. That should in turn help demand for chips and drive higher spending on equipment used to produce the chips.

In another positive for the group, U.S.-China trade tensions have seemingly simmered down in recent months, following months of tense back-and-forth between officials in the two countries that put pressure on semiconductor-related stocks.

Still, the U.S. and China’s trade relationship has been prone to unexpected twists and turns, making it difficult to call the all-clear on trade. That means trade remains one of the top risks to the group, Goldman says.

“The ongoing trade tensions between the U.S. and China and its ramifications (i.e. export bans, additional tariffs) add further uncertainty,” the firm said in its note.

Write to Akane Otani at akane.otani@wsj.com

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