Semiconductor Winners And Losers Are Growing Apart: Analyst's Top 10 Stock Picks Including Nvidia, Qualcomm, Texas Instruments

Through the first six months of 2023, many top stock indexes were trading higher, which came after a down year in 2022. One of the most talked about topics in stocks was artificial intelligence, which boosted the spotlight and valuation of semiconductor stocks.

Here’s what one analyst said about the semiconductor sector and what’s next after the first half of the year.

Analyst Takeaways: Bernstein analyst Stacy Rasgon says semiconductor stocks are up 40% year-to-date in 2023 with multiple expansion opportunities seen as a key catalyst.

“Earnings estimates have suffered a significant decline following COVID-related over-exuberance,” Rasgon said.

The analyst called the increase in semiconductor stocks “a typical response” after estimates were previously cut.

“The multiple expansion during this cycle has been remarkable, with valuations rising to levels we haven’t seen since prior to GFC (global financial crisis) given a historic trough-to-peak expansion, in part due to AI.”

Rasgon called the recovery of semiconductor stocks in 2023 historical.

“This cycle has been somewhat asynchronous given COVID-related supply chain issues and demand dynamics, with some end markets likely closer to bottom than others. AI spending is certainly happening.”

Areas of concern for the analyst are non-AI data centers, which have seen tougher spending, and the automotive semiconductor segment.

“In the wake of high valuations investors looking for positive estimate revisions from here may have to be selective.”

The analyst said positive revisions could separate the winners and losers in the sector for the second half of 2023.

Related Link: 5 Advanced Micro Devices Analyst Takeaways On AI Event: Is Chipmaker 'Somewhat Late' Vs. Rival Nvidia?

Analyst Ratings and Price Targets: Here’s a look at the current stocks covered by Bernstein in the semiconductor sector:

Advanced Micro Devices, Inc AMD: Market Perform, $80

Analog Devices, inc ADI: Outperform, $210

Broadcom Inc AVGO: Outperform, $875

Intel Corporation INTC: Market Perform, $30

Nvidia Corp NVDA: Outperform, $475

NXP Semiconductors NV NXPI: Market Perform, $175

Qualcomm Inc QCOM: Outperform, $135

Texas Instruments Inc TXN: Market Perform, $145

Applied Materials, Inc. AMAT: Outperform, $150

Lam Research Corporation LRCX: Market Perform, $500

“In our coverage, NVDA, INTC, AVGO (and maybe QCOM?) seem most likely to see support for numbers into the 2H in our opinion,” Rasgon added. “Tactically in our coverage, we believe NVDA is most likely to show strength relative to current expectations given AI demand.”

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