Since late November, the Nasdaq Composite (QQQ  ) is lower by 5%. One factor in the selling has been the emergence of the Omicron variant and recent rise in coronavirus cases which is likely to get worse in the winter months and during the holiday season. Another factor has been the tightening in monetary pace as the market now expects an accelerated taper and hiking timetable given the stickiness of inflation data. This has been especially bearish for growth stocks with high multiples.

Weakness in growth stocks impacts many tech stocks. But, it's interesting to note that semiconductor stocks are an exception. This group typically trades with more volatility compared to the Nasdaq but has been exhibiting relative strength. This is one indication of accumulation and consistent with the sector's strong fundamentals.

Another factor is that in Q3 and so far in Q4, semiconductor stocks have been, for the most part, beating earnings expectations, raising guidance, and returning money to shareholders in the form of buybacks and dividends. This pattern of strong earnings reports continues a trend which started in 2020.

The sector is also unique, because it's multiples actually decreased in 2021 due to double-digit earnings growth over multiple quarters and despite a 37% YTD gain.

Even during this risk-off period for the markets, semiconductors have been range-bound. And, this relative strength improves even more if we take some of the high-multiple semis like Nvidia (NVDA  ) or AMD (AMD  ) out of the index which are seeing outflows, more due to the sell-off in high-multiple stocks with rising rates rather than anything intrinsic to their business.

Then, we are left with chipmakers that have P/Es that are significantly less than the market average. Examples include Micron (MU  ), Broadcom (AVGO  ), Silicon Motion (SIMO  ), and Qualcomm (QCOM  ) which is a broad representation of the different categories within the industry. Each company has a forward P/E of 7.8, 19, 11, and 16, respectively which are below the S&P 500's (SPY  ) forward P/E of 22. And, each of these companies has forecasted earnings growth in the 20 to 30% range and higher than average profit margins.