Semis are up nearly 20 percent off the lows, but they could head higher. Here's why

Semis are rebounding.

The SMH semiconductor ETF has surged 18 percent off its December bottom, a welcome rebound after a 29 percent pullback during the preceding nine months.

It's not the first time chipmakers have seen those moves, says Todd Gordon, founder of

"There's a lot of precedents to the bounce that we've seen," Gordon said on CNBC's "Trading Nation" on Thursday. "It's very typical, it's not anything excessive."

In 2011, for example, the SMH ETF plummeted more than 29 percent from a peak in March to a trough in October. Over the next six months, it rebounded 40 percent.

Similarly, from June to August 2015, the ETF sank more than 27 percent, and within six months, it had rallied 28 percent.

"I like the semis. I think they have kind of stabilized," Gordon said.

Drilling down into the group, Strategic Wealth Partners president Mark Tepper says the best opportunity lies with cloud exposure.

"We'd be avoiding the companies like Qualcomm that are making chips for phones. We are bullish on the cloud, and with Intel you have an opportunity to gain exposure to the cloud at a dirt-cheap valuation," Tepper said on "Trading Nation" on Thursday.

Qualcomm shares have plummeted 19 percent in the past three months, while Intel has roared 17 percent higher. Intel trades at 11 times forward earnings compared with Qualcomm's nearly 13 times multiple.

Intel's "management strategy has really evolved with the changing times," Tepper said. "They're now focusing on data center, which makes up 30 percent of their revenues and growing, and more and more businesses now are focusing on these lower-cost computers to boost margins and help with mobility."

Intel plummeted in premarket trading Friday following a mixed earnings report. Fourth-quarter adjusted profit rose by 18 percent to $1.28 a share, beating estimates by 6 cents. Revenue increased 9 percent but fell shy of expectations.

Disclosure: Tepper's firm holds Intel.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's “Closing Bell (M-F, 3PM-5PM ET).   In addition, he contributes to CNBCand CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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