Semis' Sweet Lowdown

Chip stocks have another factor working in their favor, says Sam Olesky, principal of hedge fund Olesky Capital Management in Mill Valley, Calif. He sees the recent uptick in tech levels as the start of a rebound from the year's underperformance. A ratio comparing the Nasdaq 100 with the S&P 500 shows the former index lagging at a level in April not seen since August, when tech stocks bottomed and rallied into December.

"If it looks like consumer demand is holding up and corporate demand is relatively strong, that may allay fears, and people might look at them as a relative bargain," says Olesky.

However, chip-industry growth is forecast to increase only moderately this year and next. The amount that investors feel comfortable boosting stocks in the face of muted growth likely won't be extensive.

Main's Arthur isn't expecting a strong breakout akin to what typically occurs in a major up cycle, but he notes that current momentum could be a good start. Arthur posits that the semi HOLDRs could bounce to $37 from $32 over the course of a few months but doesn't expect a jump up to $45, as happened in early 2004. "These stocks aren't on their butts, but they're not ridiculously expensive either."

Shares of Dell gained 95 cents to $37.56 Thursday in after-hours trading.