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Investment Bank Calls Bottom For Semiconductor Stocks; Analysts Name Top Picks

At least one Wall Street firm thinks the sell-off in semiconductor stocks is over.




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In a note to clients Thursday, Evercore ISI analyst C.J. Muse proclaimed, “It’s time to buy semis.”

Major semiconductor stocks are down in the midteens percentage range after peaking about six weeks ago ahead of the tech stock sell-off. The Philadelphia semiconductor index, known as SOX, looks like it hit a bottom on May 12, Muse said.

“We believe the group has bottomed,” Muse said. His favorite semiconductor stocks now include Analog Devices (ADI), Marvell Technology (MRVL), Micron Technology (MU) and Nvidia (NVDA).

Muse noted that semiconductor stocks historically have performed well during inflationary periods due to their ability to pass along higher costs. Moreover, semiconductor stocks typically outperform the broader market and other cyclical sectors during reflationary periods, when governments try to stimulate the economy, he said.

Nvidia Stock Upgraded To Buy

Elsewhere on Wall Street, KeyBanc Capital Markets took a fresh look at several semiconductor stocks.

KeyBanc analyst John Vinh upgraded Nvidia stock to overweight, or buy, from sector weight, or neutral. He set a price target of 700 on Nvidia stock. In morning trading on the stock market today, Nvidia stock rose 3.1%, near 580.20.

Nvidia “is best positioned to monetize one of the fastest and highest value-add workloads in the data center in artificial intelligence/machine learning,” Vinh said in a note to clients.

Vinh also slashed his price targets on two other overweight-rated semiconductor stocks: Intel (INTC) and Micron. He cut his price target on Intel to 70 from 86. Vinh lowered his price target on Micron to 115 from 137.

On Thursday, Intel stock rose 0.8%, near 55.80. Micron stock advanced 0.3%, near 80.15.

Broadcom ‘Top Pick’ In Semiconductor Stocks

Meanwhile, semiconductor stocks analyst Harlan Sur of JPMorgan reiterated his “top pick” buy rating on Broadcom (AVGO) on Wednesday.

On Tuesday, Alphabet (GOOGL)-owned Google announced its fourth-generation processor chip for AI and deep learning, called TPU4, which it codesigned with Broadcom.

“Broadcom has codesigned every generation of Google’s TPU processor family and more importantly, we believe that Broadcom has won the next-gen TPU5 chip and the future-generation TPU6 chip,” Sur said in a note to clients.

Broadcom is the leader in the market for high-end custom ASIC, or application-specific integrated circuit, chips. It had about 35% market share in the $10 billion market in 2020, Sur says. That market is growing 12% to 15% a year, he says.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

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