Chipmaker stocks rose on Wednesday, helped by upbeat earnings forecasts by Linear Technology Corp and Xilinx Inc.
Shares surged on expectations an inventory correction is nearing its end following Linear's report, which was reinforced by the later report by programmable chipmaker Xilinx.
Chipmakers including Freescale Semiconductor, Fairchild Semiconductor and Analog Devices jumped Wednesday after Linear's forecast for the current quarter beat expectations late the day before.
After the market closed on Wednesday, Xilinx, which like Linear has customers in communications and other industries, beat expectations for fiscal third-quarter earnings and impressed investors with its current-quarter outlook.
One plus one is definitely three. You have two big bellwethers talking about numbers being better for the March quarter. Certainly that's giving investors comfort versus expectations going into the earnings, said ThinkEquity analyst Sujeeva De Silva.
Much of the chip industry has been in a funk since mid-2011, when manufacturers worried about a gloomy economy began to cut orders of new chips and use up existing inventories.
Investors have been waiting for that inventory correction to hit bottom, and Wednesday's news form Xilinx and Linear suggests that it has.
Shares of Xilinx surged 7 percent in extended trade after closing 5.9 percent higher on the Nasdaq.
Altera, which competes with Xilinx in programmable chips, jumped 5.1 percent in extended trade.
Dutch chip-gear maker ASML also gave an upbeat forecast on Wednesday, saying a fast-growing mobile market was driving capital spending by manufacturers.
Slow demand in the PC market is expected to keep pressure on top chipmaker Intel.
On Tuesday, Linear forecast third-quarter revenue growth of 4 to 8 percent from the previous three-month period, implying about $306.1 million to $317.8 million, topping the $302.03 million analysts had expected.
(Reporting by Himank Sharma in Bangalore; Writing and additional reporting by Noel Randewich in San Francisco)