Will investors rotate back into technology later this year?

The Nasdaq Composite is down 1.0% on Wednesday as tech stocks continued to be dull, but Independent Solutions’ Paul Meeks says investors could rotate back into technology later this year.

Highlights from Meeks’ interview on CNBC’s “Squawk Box”

According to Meeks, tech stocks are likely to recover at some point in 2022 unless the U.S. Federal Reserve takes a more aggressive approach to raise rates. On CNBC’s “Squawk Box”, he said:

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Unless the Fed indicates it’s going to move more quickly and aggressively in raising rates, we will at some point, probably not too far from now, have a peak in the 10-year treasury yield. That’s when we’ll have a recovery in tech stocks.

Meeks, however, suggested being selective in picking tech stocks as software and other names that are more sensitive to the COVID-19 crisis are like to stay under pressure. Such stocks, he said, are still not cheap enough for a bet.

Days earlier, Microsoft founder Bill Gates said Omicron could mean we are about to enter the worst part of the pandemic.

Meeks expects semiconductors to outperform technology

In the meantime, he added, semiconductors are a better bet and expects chipmakers to outperform the technology stocks. Meeks is a buyer of semiconductors at this point in time. He said:

I really like the semiconductors and expect them to continue to outperform tech, and then after we get through this turbulent period, tech to continue to outperform the broader market. For now, I’m buying select semiconductor names.

Micron Technology and Qualcomm Inc are two of his top picks, both of which have gained roughly 50% in less than three months. Meeks sees the “semiconductor capital equipment” space as widely a safe bet for investors in 2022.

In contrast, Decatur Capital’s Degus Wright picked United Microelectronics Corp as a way to play the semiconductor space this year.