Goldman Selective On Semis: Bullish On Nvidia, Xilinx, Bearish On Intel, Texas Instruments

Monthly data released by the Semiconductor Industry Association shows shipment unit trends in the integrated circuit and analog industries were tracking above-trend in August.

To play the data, a Goldman Sachs analyst recommended selective exposure in semiconductors, especially due to the prospect of a deceleration in growth in the fourth quarter of this year and the first half of 2019.

The Analyst

Analyst Toshiya Hari has the following ratings and price targets for the semiconductor stocks in his coverage universe:

Intel Corporation INTC: Sell
NVIDIA Corporation NVDA: Buy/$324
Xilinx, Inc. XLNX: Buy/$87
Texas Instruments Incorporated TXN: Sell

The analyst recommends staying invested only in names with company-specific growth drivers.

The Thesis

Overall semiconductor unit shipments and revenues were above seasonality in August, with the exception of MPUs, Hari said in a Monday note, citing SIA data. (See the analyst's track record here.)

Market Share Opportunity In Xilinx

Xilinx is well-positioned due to its disproportionate exposure to the communications end market, which, according to the analyst, is one of the end markets that could accelerate following an emergence from a multiyear downturn.

The analyst also expects the adoption of FPGAs in the data center to grow exponentially over the next few years, benefiting Xilinx.

Xilinx has the opportunity to grow market share across multiple verticals due to strong process technology execution versus Intel's Altera, Hari said.

Nvidia's Gaming Business On The Verge of Accelerating

Thanks to the introduction of Turing-based products, Nvidia's gaming business is on the verge of accelerating, Hari said. The analyst expects the introduction of the T4 inference solution along with updated software to lead to a positive inflection in the inference business within the data center segment.

The high-margin Professional Visualization segment should show robust growth, as the Turing launch helps Nvidia gain share at the expense of CPUs, the analyst said.