"For two years chips stocks have unequivocally stunk; the industry has been mired in a host of problems, including massive overcapacity and shrinking demand," says Toby Smith, adding, "But that's changing."

In his ChangeWave Investing, he suggests, "One recommendation in this sector is SanDisk (NASDAQ: SNDK), the leader in flash memory -- one of the strongest segments in semis today."

"For the second quarter in a row the semiconductor sector is showing major signs of momentum that are so good that the industry ranked at the top of the nearly 20 industries we track each quarter.

"The bottom line is that these results clearly indicate that it is time to be invested in the semis, and the best way to do this is with two short-term plays.

"So, one of our favorite recommendations is the leader in flash memory -- SanDisk, whose flash memory data storage products serve both consumers and original equipment manufacturers.

"Its products are made for a wide variety of electronic systems and digital devices from cameras to mobile phones.

"SanDisk is a real innovator, holding more than 860 U.S. patents, more than 550 foreign patents and it's the only company that has worldwide rights to both manufacture and sell every major flash card format.

"SNDK managed to weather the downturn better than the Street expected. For Q1 it reported that revenues fell 22% to $660 million, but beat the estimates by more than $120 million -- and only lost 48 cents per share vs. the 76 cents consensus.

"SanDisk recently renewed its existing cross-licensing agreement with flash chip supplier Samsung. Importantly, this new supply agreement removes a cloud from over SNDK and provides more clarity about its long-term business model and outlook.

"Also, NAND flash memory prices were up 30% in April over March, and that's much better than the SanDisk's forecast.

"Our intelligence points to further strength this summer thanks in part to Apple orders related to new iPhones and iPods, as well as orders for memory from Sony and Nokia for new handsets."