Goldman Sachs Met With Semiconductor Giants; Here's What Happened

In a report published Thursday, Goldman Sachs analyst James Covello mentioned the key takeaways after attending meetings with Semiconductor giants -

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Strategy: "Diversification into higher growth or margin revenue streams is top of mind at Intel, Nvidia and Altera. Intel, Nvidia and Altera highlighted efforts to shift toward higher growth or margin areas and away from slower growing, volatile, or legacy revenue streams," Covello wrote. PCs and comms infra: These continue to exhibit near-term weakness, and there is lack of clarity into how much demand may improve in the second half of this year. "Relative to prior discussions, we believe companies deemphasized the importance of Windows 10 as the main growth driver, with Intel focusing on lean supply chain inventory and Nvidia focusing on DirectX 12," Covello said. SPE fundamentals: These continue to be stronger than semi fundamentals, especially for companies that have exposure to 3D NAND, namely Lam and Applied. Companies have projected merely 10 percent of NAND capacity to be 3D NAND by the end of this year, "creating a longer-term opportunity." Data center: "Intel, Nvidia and Altera are each targeting data center growth. Nvidia maintained that it primarily competes with Intel's Xeon platform at the high end, and that its easily-programmed CUDA software is a competitive advantage for adoption," the Goldman Sachs report mentioned. Covello commented further that Altera had highlighted its adoption of Open CL, while recent Intel and Microsoft announcements "validate the FPGA opportunity." Intel indicated the strength of its portfolio, while saying that "technologies that begin as extensions or separate chips are typically integrated into SoCs over time." Goldman Sachs has a Sell rating on both Intel and Nvidia; a Neutral rating on Altera and a Buy rating on Lam.