A longtime bear is ‘creeping back’ into tech — and has some picks to play it

Published Tue, Mar 21 202310:04 PM EDT

How the tides have turned in a few weeks: after a muted month for tech in February, investors are flocking back into the sector amid tumbling yields and turmoil in the banking sector. Market watchers are weighing the potential for a smaller interest rate hike or even a pause by the U.S Federal Reserve this week — which would be a boost for growth sectors such as tech. The Nasdaq Composite has gained about 4.8% since Mar. 10, as the collapse of Silicon Valley Bank reverberated through the market. That's bigger than the 2.3% gain in the S & P 500 over the same period. Tech investor Paul Meeks — an unabashed longtime tech bear — is also beginning to warm to the sector. "I'm creeping back into the sector after long advocating an underweight position in it," he said in notes to CNBC on Friday. "I do think within technology, there are some pretty interesting, very specific stories," the portfolio manager at Independent Solutions Wealth Management, added. One corner of tech that he likes is semiconductors. While U.S. chip makers such as Nvidia and Broadcom have become investor favorites for exposure to the artificial intelligence boom, Meeks prefers European semiconductor names with industrial applications and exposure to automakers. Dutch semiconductor equipment manufacturer ASML is one of his top picks in the space. ASML is the only firm in the world capable of making extreme ultraviolet (EUV) machines — highly complex machines needed to manufacture the most advanced chips. "It's the only producer [of EUV machines] essentially on planet Earth. And it is important technology going forward. So, I think they are, what we say in the United States, in the catbird seat," Meeks said. Meeks is not the only one who's bullish on ASML. Over 80% of analysts covering the stock rate it a buy, giving it average potential upside of 20.8%, according to FactSet data. Chip makers NXP Semiconductors and STMicroelectronics also made Meeks' list, with the tech investor saying they are two stocks that he "likes very much." Outside of semiconductors, Meeks is also looking at German software firm SAP . The firm announced last week that it will be divesting its stake in survey software company Qualtrics for about $7.7 billion , as part of a $12.5 billion acquisition by Silver Lake and CPP Investments. Meeks said SAP will receive a "huge windfall of cash" through the sale, and could deploy the money to buy back "a lot of stock" or pay out a bigger dividend. The firm could also get more aggressive with research and development, or mergers and acquisitions, he said. "Keep an eye on SAP because this windfall for them could be a really nice blessing, a game-changer," he added.