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Once-hot semi stocks are in a correction. Here's why some are shrugging off the pain

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Trading Nation: Trust the chip bounce?

Semiconductor stocks were among last year's hottest trades, as names like Nvidia, Applied Materials and Broadcom posted double- and triple-digit returns. Fast-forward to this year, and the once-hot chip stocks have quickly fallen out of favor with investors and into correction territory.

The VanEck Vectors Semiconductor ETF (SMH) has dropped 11 percent from its mid-March highs, and on Wednesday was trading modestly higher on the session.

Still, some market watchers see a bounce back in the cards, citing a fundamental and technical picture which has not completely broken down.

"There's still concern here because of the regulation issue, and that's not going to go away or be resolved anytime soon. But we also have to keep the whole thing in perspective. The SMH is doing no different than it's done four other times in the last year or so," said Matt Maley, equity strategist at Miller Tabak, Tuesday afternoon on CNBC's "Trading Nation."

Maley was referring to pullbacks in the ballpark of 10 percent, pointing out that the SMH is still trading above both its 200-day moving average — though as of Wednesday afternoon it was below its 50- and 100-day moving averages — and a longer trend line extending back about two years.

Within the SMH, Maley is optimistic about Micron shares, citing the semiconductor maker's relatively cheap multiple and ability to hold above the key $50 per share level.

The general fundamental picture is still strong for the semi space, said Gina Sanchez, CEO of Chantico Global.

"That doesn't mean the sector wasn't out ahead of its skis, but the fundamentals are actually quite strong," she said Tuesday on "Trading Nation," citing strong demand and developments in artificial intelligence and cloud computing.

The entire space was under pressure in Wednesday trading as fears of a trade war erupting between the U.S. and China came to a boil; companies like Micron, Skyworks Solutions and Qualcomm have significant revenue exposure to China.