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Get Out of Chip Stocks in Second Quarter?

The semiconductor sector’s revenue will grow 18 percent in 2010, according to a new report from UBS. The sector has been battered by the recession, so are the chip making stocks a buy right now? Uche Orji, analyst at UBS, and Doug Freedman, senior semiconductor analyst at Broadpoint AmTech, shared their insights.

“We’re very bullish for the year and believe the first quarter will be above seasonal and second quarter will be above seasonal,” Freedman told CNBC.

Freedman sees demand in the latter half of the year supporting the inventory that the industry puts in place during the first half.

In the meantime, Orji warned investors of “air pockets” in the chip sector during the second quarter.

“There’s no big demand event in second quarter,” he said. “So in the near term, we’re a bit worried about second quarter…But looking beyond that, to a large extent, once we get past that concern about a second quarter air pocket, things might be a little more range-bound.”

Meanwhile, Orji said the second half of the year could drive semiconductor stocks upward, based on seasonality and improvement in enterprise spending.

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No immediate information was available for Freedman or Orji.