Semiconductor stocks are rocking as investors buy into excitement over artificial intelligence and other market drivers. A Wall Street analyst on Friday upgraded AMD stock and Intel stock, and named Nvidia stock as a top pick for 2024.
Generative AI is among the secular tailwinds that will boost select semiconductor stocks in the year ahead, BofA Securities analyst Vivek Arya said in a client note. Nvidia dominates the AI chip market, while Intel and AMD recently unveiled new initiatives to boost their positions in the fast-growing market. Other drivers include cloud computing and rising chip content in cars, Arya said.
His top picks among semiconductor stocks for 2024 include Nvidia, NXP Semiconductors and Broadcom.
Plus, Arya upgraded Advanced Micro Devices, Micron Technology and Macom Technology Solutions to buy from neutral. In addition, he upgraded Intel to neutral from underperform. He also raised his price targets on those semiconductor stocks and others.
Analyst 'Lukewarm' On Smartphone Chips
Meanwhile, Arya soured on contract chipmaker GlobalFoundries, lowering his rating on GFS stock to neutral from buy.
Arya said he is "lukewarm" now on semiconductor stocks exposed to smartphones, telecom and enterprise markets.
He sees semiconductor sales, excluding memory chips, rising 8% to 10% in 2024, vs. an expected decline of 8% in 2023. Data center chip sales will surge and the automotive market will stay resilient, Arya said. He also predicted a recovery in the personal computer and smartphone markets.
Semiconductor Stocks Outperform S&P 500
Year to date, the Philadelphia Semiconductor Index, known as SOX, has risen over 62%. That compares with an increase of about 23% for the S&P 500. The SOX includes the 30 largest semiconductor stocks traded in the U.S.
Elsewhere on Wall Street, JPMorgan analyst Harlan Sur said he also is upbeat about chip industry prospects in 2024.
"We are at the cusp of a semiconductor up cycle (approximately four to six quarters of positive year-over-year growth) with industry revenue growth turning positive year over year in Q4 2023 and which we believe should persist through 2024 and into 2025," Sur said in a client note Friday.
His favorites among semiconductor stocks include Analog Devices, Arm Holdings, Marvell Technology, Microchip Technology and Micron.
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