Artificial intelligence stocks including chipmaker Marvell Technology, Arista Networks and Synopsys, which has launched AI-based chip-design tools, lead this weekend's watch list of five stocks near buy points. In addition to MRVL, ANET and SNPS stock, weight-loss drug leader Novo Nordisk and Heico, a military and commercial aircraft contractor, round out the list.
ANET stock is part of the flagship IBD 50 list of leading growth stocks and also part of the current SwingTrader portfolio. SNPS is part of the IBD Long-Term Leaders list, which highlights firms with solid, reliable growth that may be worth buying on a pullback.
For now, the powerful AI-led stock market rally remains intact, but it just got a dose of earnings volatility, with Tesla and Taiwan Semiconductor both slumping after their Q2 reports. The coming week could be pivotal, with the Federal Reserve expected to hike its key interest rate again and big earnings reports coming from Microsoft, Google parent Alphabet and Meta Platforms.
Be sure to read IBD's The Big Picture every day to stay in sync with the market direction and what it means for your trading decisions.
MRVL Stock
Marvell makes chips used in wireless phone networks, automobiles, industrial systems, data storage devices and data centers.
MRVL expects its AI chip business to grow to $400 million in fiscal 2024, up from $200 million in fiscal 2023. Then it sees AI sales doubling again in fiscal 2025 to $800 million, reaching about 15% of sales. However, that strength will be partly offset by near-term softness in enterprise networking and data storage.
On July 11, KeyBanc raised its price target for MRVL stock to 80 from 70, highlighting design wins from Amazon and Google.
On Friday, MRVL stock rose 0.3% to 63.41. MRVL stock has a 67.99 buy point from an eight-week consolidation, according to a MarketSmith analysis. That consolidation followed an explosive 32% one-day rally as MRVL stock gapped up on Q1 earnings.
With a couple of more sessions, MRVL stock might form a handle that would offer a slightly lower 66.81 entry point.
ANET Stock
Arista sells computer network switches that speed up communications among racks of computer servers packed into "hyperscale" data centers. In 2022, Facebook-parent Meta Platforms (META) accounted for 26% of Arista revenue, while Microsoft (MSFT) chipped in 16%.
ANET stock surged 23.5% in the three sessions following Nvidia's Q2 guidance. Demand for AI chips is seen as a precursor to demand for more computer networking bandwidth.
Still, just how rapid the impact of AI on the networking sector will be remains to be seen.
At a JPMorgan tech conference on May 23, Arista Chief Financial Officer Ita Brennan talked cautiously about a potential AI boost.
"We have deployed some AI use cases, but it's relatively small. I think we look at it as, it's a good underpinning of kind of future momentum and demand, particularly from some of the larger hyperscale customers."
Investors will be keen to hear an updated take on the AI opportunity when ANET reports Q2 earnings after the close on July 31. Wall Street expects the AI stock leader to earn $1.44 a share on sales of $1.37 billion, representing year-over-year increases of 33% and 31%, respectively.
Keep in mind that buying a stock ahead of earnings brings elevated risk. IBD recommends using an options strategy around earnings.
Also note that Microsoft (Tuesday) and Meta (Wednesday) report this coming week. Their earnings, guidance and especially spending plans will be important for key supplier Arista.
On Friday, ANET stock edged up 0.1% to 171.64, closing up 3.7% for the week even as some other leading AI stocks finished in the red.
Arista has a 178.36 buy point from an 8-week consolidation. Arista, which isn't as extended as some other AI stocks, is about level with its prior 171.44 buy point.
SNPS Stock
In a July 13 note, KeyBanc analyst Jason Celino hiked his SNPS stock price target to 500 from 467, calling AI-based electronic design automation (EDA) tools the biggest technological breakthrough for the EDA industry in 30-40 years.
At its annual users conference on Wednesday, Synopsys launched a suite of AI-driven solutions for the design, verification, testing and manufacturing of the most advanced digital and analog chips. Synopsys described its new Synopsys.ai product suite as the industry's first full-stack, AI-driven set of EDA tools.
KeyBanc's Celino sees SNPS as positioned to further consolidate market share gains in the AI era, producing another decade of low-double-digit growth.
Wells Fargo added SNPS stock to its Q3 tactical ideas list, keeping a 505 price target. He noted strong demand from China as it tries to develop its domestic chip industry amid U.S. export controls denying its geopolitical rival key technology. Some, but not all, EDA technology is subject to export restrictions.
SNPS stock rose 0.5% to 454 on Friday. Synopsys has a 468.03 buy point from a shallow seven-week cup base, but it may be a couple of days from forming a handle.
SNPS will report fiscal Q3 earnings on Aug. 16, but rival Cadence Design Systems has earnings due on Monday, which could affect the entire sector.
NVO Stock
Novo Nordisk was featured as IBD Stock Of The Day on Thursday as shares of the diabetes and weight-loss drug leader bounded about their 50-day moving average.
NVO stock gapped above a 161.85 early entry in Thursday's session, then rose 0.7% to 165.66 on Friday. It's still in range from the 50-day line as an early entry. NVO stock has a 172.97 buy point from a 13-week flat base.
In May, Novo Nordisk unveiled the results of a once-daily, 50-milligram pill of semaglutide. Over 68 weeks, patients lost an average 17.4% of their body weight compared with a 1.8% weight loss for placebo recipients. Semaglutide is the chemical behind Wegovy and Novo's diabetes treatments Ozempic and Rybelsus.
Analysts expect weight-loss drugs accounted for 18% of the Q2 sales, while diabetes treatments generated nearly 60% of sales. Novo earnings are due on Aug. 10. EPS is seen growing 67.5% to $1.34 on 46% sales growth to $8.19 billion.
HEI Stock
Heico is the world's largest provider of replacement parts for commercial aircraft, as well as a supplier of electronic components for aviation, defense and other industries.
On June 13, BofA analyst Ronald Epstein raised his target to HEI stock to 220 from 190, keeping a neutral rating. He cited at least 25% year-over-year growth for both its Flight Support Group and Electronic Technologies Group. He highlighted Heico's recent largest-ever acquisition of Wencor Group for $2.05 billion in cash and stock as a positive for revenue, given their complementary portfolios.
HEI stock rose 0.2% to 177.45 on Friday. Though HEI stock tumbled following Q2 results, it quickly regained altitude, carving out an eight-week cup-with-handle base with a 177.91 buy point.
