Analysis: MRVL NVDA LRCX GOOGL

All three of our semiconductor stocks - Marvell Technology Group (MRVL) , Nvidia (NVDA) , and Lam Research (LRCX) - are trading higher Wednesday, with the most notable coming from MRVL which was up over 4% at the time this was written.

One reason for strength may be from a research note by analysts at Needham who recently went on a five day tour in Asia and met with 12 companies in Taipei, Hong Kong, and Seoul. One of the takeaways the analysts highlighted in the note was that 5G infrastructure builds are accelerating, especially in China. Additionally, the analysts comment on how their conversation with a leading Chinese mobile operator suggested an "aggressive" ramp of 5G base stations this year, with plans for more next year. Although it was not mentioned by name, we know that Marvell is a leader in 5G base stations, and this piece of research is excellent news for the company. The visibility of this 5G catalyst is why we have repeatedly looked to add to this position on volatility (as discussed in our August members only call).

The analysts also mention in their note how their checks "point to some signs of inventory stabilization at certain hyperscale customers, such as Microsoft and AWS." However, Needham adds that (Alphabet (GOOGL) ) Google's inventories are still elevated, and the company has not resumed purchases just yet. Hyperscale spending is what you want to be on the lookout for when it comes to Nvidia because on the most recent earnings call (see our analysis here), management discussed how a "near-term pause in demand" from these customers has weighed on results/guidance. If we can see a return in spending from all three big players, this tailwind will certainly help get the Data Center segment of Nvidia's back on track, and the timing could not be more perfect with the upcoming return to growth in much larger Gaming business.

And as it relates to Lam Research, Needham mentioned how they do not believe we have seen a bottom in NAND and DRAM average selling prices, but "expect a normal supply/demand balance exiting 2019, most likely 1H20" and they view 5G as a key demand catalyst for 2020. We don't really view this piece of commentary as new information because recently more and more analysts and investors have begun to buy into the upcoming inflection in memory pricing, hence our recent decision to book huge profits in LRCX off its recent +15% run.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long MRVL, NVDA, LRCX, GOOGL.