As semiconductor earnings pick up steam, the quarterly reports and short term stock pops could be obscuring the long-term view of the sector at large.
Intel Corp.'s (INTC) earnings are building headlines after big pops from Lam Research (LRCX) and Xilinx (XLNX) on their own earnings report and have bolstered the overall index significantly higher and sent the sector soaring.
However, the one-day pops that could be fleeting might only be an appetizer to the entrée that is the nascent fourth industrial revolution that semiconductors will need to underwrite.
"We believe 5G and AI will be the megatrend underlying the ubiquitous computing which will drive the semiconductor growth in the future," Taiwan Semiconductor (TSM) CEO C.C. Wei told analysts last week. "We still say the high-end smartphone will grow because of 5G and AI's application."
The growth and shifts in smartphone and computing technology will sustain strong semiconductor demand and necessitate increasing innovation in the semi space.
Similar comments on the technology shift were touted by IBM (IBM) CEO and semiconductor customer Ginni Rometty after her companies focus on emerging technology in artificial intelligence, cloud, and blockchain helped buoy shares higher.
This is especially pertinent as IBM's tech focus branches out to numerous companies and industries and underlines the secular shift to technology that is reshaping the overall economy. A shift that will be sculpted by semiconductor technology.
"The lines are blurred between what is a "tech" company and what is not. Clearly those companies that produce computers, digital tools, and microchips are tech companies," Wilmington Trust CIO Tony Roth explained. "But what about the fast food company that utilizes technology at the core of its business, investing tremendous capital to improve efficiency? Or the grocery store deliverer that relies entirely on artificial intelligence and robotics in its warehouse?"
On that basis, Roth forecasts that in fewer than 10 years technology will be embedded in nearly all industries and sectors that the vast majority of companies in the world will become essentially "tech hybrids".
If that does come to fruition, the world's largest semiconductor company in Intel certainly stands to benefit in the long term and so too do innovative chip companies like Nvidia (NVDA) , Qualcomm (QCOM) and Advanced Micro Devices (AMD) .
The most visible barrier to growth that stands in the way of growth in the sector at present is the Sino-American trade spat.
For example, Intel gathers 23% of its revenue from mainland China, Broadcom (AVGO) generates 48% of its revenue from mainland China, and Micron (MU) musters a hulking 57.2% of its revenue from the nation.
The addition of macro pressures that curb the ability of semiconductor companies to cash in on China's booming market on top of the cyclical concerns present in the space could certainly curtail capex from the sector's stalwarts. The lack of spending to keep technology moving forward and stall the pace of the overall revolutionary shift .
Still, all signs point to its coming impact, whether or not its delayed by short term political strife. An investor's timeline will simply need to be long enough to be patient.
"For the fourth industrial revolution...we're just at the dawn of this era," Keith Block, CEO of cloud king Salesforce (CRM) , told Jim Cramer earlier this month. "No industry is really immune from this level of disruption."