Semiconductor stocks are swinging as investors buy into excitement about artificial intelligence and other market drivers. A Wall Street analyst on Friday upgraded AMD stock and Intel stock, rating Nvidia stock a top pick for 2024.
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Generative AI is among the secular tailwinds that will boost select semiconductor stocks next year, BofA Securities analyst Vivek Arya said in a note to clients. Nvidia dominates the AI chip market, while Intel and AMD recently unveiled new initiatives to strengthen their position in the fast-growing market. Other driving factors include cloud computing and rising chip content in cars, Arya said.
His top semiconductor stock picks for 2024 include: Nvidia (NVDA), NXP Semiconductor (Nxby) And Broadcom (Afgo).
In addition, Arya was promoted Advanced micro devices (AMD), Micron technology (Mo) And MACOM Technology Solutions (Mtsy) to buy from neutral. In addition, he promoted Intel Corporation (you are K) to neutralize poor performance. He also raised his price targets for semiconductor stocks and others.
Analyst ‘lukewarm’ on smartphone chips
Meanwhile, Arya is stressed about the chipmaker’s contract GlobalFoundries (gfs), and lowered his rating on GFS stock to neutral from buy.
Arya said he is now “lukewarm” on semiconductor stocks exposed to the smartphone, telecom and corporate markets.
He expects semiconductor sales, excluding memory chips, to rise 8% to 10% in 2024, versus an expected 8% decline in 2023. Data center chip sales will rise and the automotive market will remain resilient, Arya said. He also expected a recovery in the PC and smartphone markets.
Semiconductor stocks are outperforming the S&P 500
Year-to-date, the Philadelphia Semiconductor Index, known as SOX, is up more than 62%. This compares to an increase of about 23% for the Standard & Poor’s 500. The SOX index includes the 30 largest semiconductor stocks traded in the United States.
Elsewhere on Wall Street, JPMorgan analyst Harlan Suhr said he was also optimistic about the chip industry’s prospects in 2024.
“We are on the cusp of a semiconductor bull cycle (roughly four to six quarters of positive year-over-year growth) with industry revenue growth turning positive year-over-year in the fourth quarter of 2023 which we believe should continue into 2024 and into 2025,” Sur said in a client note on Friday.
His favorites include semiconductor stocks Analog devices (Addy), Holding arm (arm), Marvell technology (MRVL), Microchip technology (MHP) and micron.
Follow Patrick Seitz on X, formerly Twitter, at @IBD_PSeitz For more stories on consumer technology, software and semiconductor stocks.
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