Today Jim is talking about the semiconductor industry. Despite a difficult global economic environment, quite a few semiconductor companies are reporting good news.

This is real. Like a lot of industries, there was a lot of deferred spending. They thought that maybe the world wasn’t going to come back. But now, they have waited long enough that they cannot help but to come back with spending.

The form factors are constantly getting smaller. In order to keep up with that, they will have to keep purchasing equipment so that they can produce those smaller chips. There has also been a lot of innovation in mobile phones and tablets that will require new equipment.

We are also seeing this in cars. The average car is now 10.8 years old. We are seeing more spending in housing. And we are seeing a lot more spending in semiconductors. What we are seeing is the beginning of new cycles after we ran down a lot of inventory during the recession. Some companies stepped up to the plate, and others deferred – but it looks like these companies just can’t defer anymore, and that is what we are seeing.

Most people think that Intel and Microsoft won’t be the primary beneficiaries. The think that these companies are still tied too much to the personal computer industry.

Texas Instruments is interesting because they are a very undervalued company. If we are in a new cycle, then Texas Instruments could be the company that gains the most.

It is not too late to get in right now. There are many semiconductor companies that are undervalued. We will probably see a new rally led by semiconductors, which is positive because they are such a capital intensive business, and they make up a large portion of the S&P 500.