Advanced Energy Industries Takes A Hit As The Semiconductor Cycle Is Still Sorting Itself Out

I believe Advanced Energy Industries (AEIS) highlights at least some of the risks I've seen in the rally in semiconductor and semiconductor equipment names. Even though the year-to-date performance is still strong (up about 18% as of this writing), the shares have come down about 15% off a recent peak on a combination of weaker first quarter results and guidance, as the market isn't seeing the quick, sharp recovery that investors want to believe is going to happen.

Another weak quarter (or two) remains in play as a risk factor, but I think these shares hold some appeal for more risk-tolerant investors. I don't see any real sign that AEIS is losing traction with its two largest customers (Applied Materials (AMAT) and Lam Research (LRCX)), and I think the long-term outlook and realities of the semiconductor market mean good long-term demand for chip-making equipment and AEIS's components.

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Advanced Energy Industries Takes A Hit As The Semiconductor Cycle Is Still Sorting Itself Out