Investor favorites Nvidia and Advanced Micro Devices took a beating this year amid a broader tech sell-off and now look ripe for investors to buy in. But fund manager Jordan Cvetanovski is pouring his money into other chip stocks – including what he says is “the best business in the world.” The iShares Semiconductor ETF, or SOXX, which tracks semiconductor performance, has fallen nearly 30% this year, putting it firmly in bear territory, as consumers pivot away from riskier growth stocks in amid concerns about the Fed’s aggressive rate hike cycle. about these quality chip stocks. But Cvetanovski is now choosing to stay out. Speaking to CNBC Pro Talks, Cvetanovski, chief investment officer and portfolio manager at Pella Funds Management, said he thinks Nvidia is a “great business” and has “no doubt” that his fund We will eventually own shares of the tech giant. “But for now, they’re still expensive from a free cash-flow growth standpoint,” Cvetanovski said. Instead, he credits chipmaker Dutch ASML, a company he sees as the core of the semiconductor business. “In my opinion, ASML is one of the best companies in the world, if not the best… Because without ASML, in my humble opinion, there is no company. what technology actually exists,” says Cvetanovski. He emphasized the importance of ASML to the field. He added: “Moore’s laws would essentially not exist without them. Moore’s Law predicts that the density of transistors that can be fitted on a chip will double about every two years. It has long been considered an important benchmark for the rapid development of the semiconductor field. Chip manufacturers want to use the narrowest possible wavelength of light in lithography so they can fit more transistors into each piece of silicon. Its ASML exclusivity is key to this process. It is the only company in the world capable of making an ultraviolet (EUV) machine – the very complex machine required to manufacture the most advanced chips. These machines project a particularly narrow beam of light onto the silicon wafers, allowing more transistors to be inserted into a single chip. “We think that for the best business in the world based on a free cash flow yield plus three percent with almost two-year order books and what’s happening in the market in particular, you don’t just see natural growth in chip demand but also Cvetanovski said every region wants to have their own in-house chip factory on their sovereign land Read more Chip supply problems are still causing a Some of the world’s biggest companies have headaches Intel CEO now expects chip shortages to last through 2024 Citi downgrades NXP Semiconductors, says corporate profits near peak Demand [their EUV machines] will certainly continue for many years to come. “Innovation can’t come from anywhere but them… No one else can do what they do,” he added. Shares in ASML are down more than 30% this year. Cvetanovski admits they still have room to fall further but he is holding his ground on equities. “The market will go down if the sell-offs continue, but we think we will only buy more if the price is right,” he said.
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