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For years, the semiconductors were big sector leaders, and with good reason. The increase in uses for a wide variety of chips in everything from cars to industrial to video gaming made demand jump. While the demand skyrocketed, so did the need for the machines that make and calibrate semiconductors. Last month the semiconductors and capital equipment stocks were shown the way to the woodshed, where they took a beating.

In a recent research report, Merrill Lynch noted that October data showed that the semiconductor weighting versus the S&P 500 held at a 1.1 times figure, compared with a much higher peak of 1.46 times in March of 2017. Versus overall technology, semiconductors are equal weight, and below electronic equipment, software and information technology services.

This data suggest to the analysts that there is a big-time opportunity for investors, and they focused on four companies that are all rated Buy at Merrill Lynch but are currently underweighted and under-owned. While better suited for risk-tolerant growth accounts, they could bring some outstanding year-end gains.

Advanced Micro Devices

After years of frustrating performance, this top company appeared to have turned the corner, but it was absolutely destroyed in October. Advanced Micro Devices Inc. (NYSE: AMD) is one of the largest suppliers of PC microprocessors and graphics processors worldwide to computing original equipment manufacturers. The company’s main product lines include desktop, notebook and graphics processors, and embedded/semi-custom chips.

Last year the company released its first major offering in five years, the Ryzen chipset, which many feel is uniquely positioned to compete with the big players like Intel and Nvidia in the $50 billion total addressable market for personal computers, gaming, artificial intelligence and servers.

While earnings were somewhat disappointing, upcoming catalysts could drive the shares. The analysts noted this in a recent report:

Reiterate Buy ahead of new nanometer CPU/GPU launches on Tuesday, event refocuses investors back to AMD’s generational share gain opportunity. EPYC 2/Rome can leverage software and qualification work started with EPYC 1, we expect Rome ramp in the second half of 2019.. New Vega GPU will be industry’s 1st at nanometers; AMD already annualizing $100 million+ in data center GPU sales, addressing $10 billion+ opportunity.

The Merrill Lynch price target for the shares is $30, while the much lower Wall Street consensus target is $23.87. The stock closed Friday’s trading at $20.23 a share.

KLA-Tencor

This is a strong, large-cap semiconductor capital equipment play for investors. KLA-Tencor Corp. (NASDAQ: KLAC) designs, manufactures and markets process control and yield management solutions worldwide.

It offers chip manufacturing products, such as front-end defect inspection tools, defect review systems, advanced packaging process control systems, metrology solutions, in-situ process monitoring products and lithography software; wafer manufacturing products comprising surface and defect inspection, wafer geometry and nanotopography metrology and data management; and reticle manufacturing products, such as defect inspection and pattern placement metrology products.

The company also provides light emitting diode (LED), power device and compound semiconductor manufacturing products consisting of patterned wafer inspection, defect inspection, surface metrology and data management products; thin-film head metrology and inspection, virtual lithography, in-situ process monitoring, transparent and metal substrate inspection and data management products for data storage media/head manufacturing; and stylus and optical profiling and optical inspection products for microelectromechanical systems manufacturing, as well as products for general purpose/lab applications.

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