Semiconductor stocks are surging as investors embrace enthusiasm about artificial intelligence and other market drivers. A Wall Street analyst upgraded AMD and Intel stocks on Friday, and named Nvidia stock a top pick for 2024.
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Generative AI is among the long-term tailwinds that will boost some semiconductor stocks in the coming year, BofA Securities analyst Vivek Arya said in a client note. Nvidia dominates the AI chip market, while Intel And AMD recently unveiled new initiatives to strengthen its positions in a rapidly growing market. Other driving factors include cloud computing and the increase in the number of chips in cars, Arya said.
His top picks among semiconductor stocks for 2024 include Nvidia (NVDA), NXP Semiconductors (NXPI) And Broadcom (AVGO).
Additionally, Arya has been upgraded Advanced microsystems (AMD), Micron technology (IN) And Macom Technology Solutions (MTSI) to buy neutral. In addition, he improved Intel (INTC) from neutral to underperforming. He also raised his price targets on these and other semiconductor stocks.
A “lukewarm” analyst on smartphone chips
Meanwhile, Arya has soured on the chipmaker contract Global Foundries (GFS), lowering its rating on GFS stock to neutral from purchase.
Arya said he was “lukewarm” on semiconductor stocks with exposure to the smartphone, telecom and enterprise markets.
It forecasts that semiconductor sales, excluding memory chips, will increase 8% to 10% in 2024, compared to an expected decline of 8% in 2023. Sales of data center chips will increase and the automotive market will remain resilient, a Arya said. He also predicted a recovery in the personal computer and smartphone markets.
Semiconductor stocks outperform the S&P 500
Year to date, the Philadelphia Semiconductor Index, known as SOX, is up more than 62%. That compares to an increase of about 23% for the S&P 500. SOX includes the 30 largest semiconductor stocks traded in the United States.
Elsewhere on Wall Street, JPMorgan analyst Harlan Sur 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. the other in the fourth quarter of 2023 and which we expect to persist through 2024 and into 2025,” Sur said in a client note Friday.
His favorites among semiconductor stocks include Analog devices (ADI), Arm holds (ARM), Marvell Technology (MURLY), Microchip technology (MCHP) and Micron.
Follow Patrick Seitz on @IBD_PSeitz for more articles on consumer technology, software and semiconductor stocks.
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