Semiconductor stocks face much uncertainty heading into first-quarter earnings season. But those exposed to the artificial intelligence megatrend, such as Nvidia, appear best positioned, a Wall Street analyst says.
"Against a noisy macro/tariff backdrop, we view AI as the best/safest growth vector," Oppenheimer analyst Rick Schafer said in a client note late Monday.
Schafer named Nvidia, Broadcom, Marvell Technology and Monolithic Power Systems his "top picks."
Many chipmakers likely will report a boost to their Q1 results from "tariff-induced pulls-ins," he said. But their guidance will be "tempered by trade war uncertainties and general lack of visibility."
He added, "We see limited direct impact to AI spend at least near term."
President Donald Trump's tariffs currently don't apply to semiconductors. But tariffs on chips are under consideration.
Also, Chinese imports of smartphones, PCs and other electronics, which use computer chips, are subject to a 20% tariff imposed earlier this year. However, as of last Friday, they are exempt from the much steeper "reciprocal" tariffs on China goods.
"We see tariff-related price hikes most acutely impacting end-demand for consumer products like PCs/smartphones," Schafer said. "Pre-tariffs most expected flattish PC and handset markets this year."
Earnings season for semiconductor stocks kicks off Thursday with a Q1 report from Taiwan Semiconductor Manufacturing. But activity picks up next week with reports from Intel, Texas Instruments and others.
Ahead of earnings season, Schafer cut his price targets on five chip stocks: Analog Devices, Marvell, Monolithic Power, NXP Semiconductors and Veeco Instruments.
He reiterated his outperform rating on Nvidia stock with a price target of 175. On the stock market today, Nvidia stock rose 1.4% to close at 112.20.
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