More on Wall Street are betting on a soft landing for semiconductor stocks that lagged the broader market in 2022 as a two-year, pandemic-driven chip shortage suddenly flipped into a glut.
BofA Securities chip analyst Vivek Arya said Friday that a “soft landing could drive hard takeoff in chips stocks,” although he expects a bumpy start to 2023 “as stocks digest Q4 gains and are exposed to softer consumer demand.”
That follows Evercore ISI analyst C.J. Muse on Thursday, who listed Nvidia Corp.
as his top pick going into 2023 on the belief that the mid-October low of 2,162 would result in a “fundamental bottom” and a soft landing for the PHLX Semiconductor Index
following a semiconductor shortage that flipped into a glut earlier in the year.
That said, BofA’s Arya listed his top picks as Nvidia, and also had top picks that agreed with Muse with analog chip maker Analog Devices Inc.
and chip and software company Broadcom Inc.
which received high marks recently for how it was handling its product backlog and its glut-prevention sales practices. Muse has overweight ratings on all those stocks.
Arya differed with Muse in the rest of his picks, highlighting Applied Materials Inc.
and KLA Corp.
as the “semicaps key ‘arms-dealers’” as the fab industry tries to build more capacity outside of Taiwan.
“Chip independence as important in next era as energy independence was in last century,” the analyst said.
BofA Securities also upgraded electronic-design automation companies Cadence Design Systems Inc.
(price target $205) and Synopsis Inc.
(price target $410) to buy from neutral, as “our prior concerns regarding impact from China restrictions on EDA demand have proven to be overly conservative.”
The SOX index closed the week down closed down 3.1%, compared with a 2.1% decline on the S&P 500 index
and a 2.7% fall on the tech-heavy Nasdaq Composite Index
For the year, the SOX is down 33%, the S&P 500 is down 19%, and the Nasdaq is off 32%.
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