Wall Street analysts are turning more positive on semiconductor stocks as some segments of the market heat up, including graphics chips for artificial intelligence. Nvidia, in particular, is seen benefiting from the rise of generative AI, such as ChatGPT.
Rival graphics-chip maker Advanced Micro Devices also is positioned to gain from data centers running AI workloads, analysts say.
Barclays analyst Blayne Curtis said he is getting more positive on semiconductor stocks "after being extremely negative for nearly all of 2022."
In a note to clients Monday, Curtis said he has turned more positive on data center, PC and smartphone chipmakers since semiconductor stocks bottomed in October.
Semiconductor Stocks Upgraded
Curtis upgraded AMD, Qualcomm and Skyworks Solutions to overweight, or buy, from equal weight, or neutral.
He also kept his buy rating on Nvidia stock and raised his price target to 250 from 170.
On the stock market today, Nvidia jumped 7.6% to 191.93, as AMD surged 9.2% to 76.53. Qualcomm popped 6.6% higher to 131.03, while Skyworks climbed 6.4% to 109.61.
Curtis called generative AI "a real driver" for semiconductor stocks, with Nvidia and AMD among the beneficiaries. Generative AI describes computer algorithms that can create new content, including text, images, software code and more.
Microsoft Ups Investment In OpenAI
On Monday, Microsoft announced an expanded partnership with OpenAI, the organization behind text generator ChatGPT and image generator Dall-E.
This third phase of its partnership includes a "multiyear, multibillion dollar investment to accelerate AI breakthroughs," Microsoft said in a blog post.
Citigroup estimates that ChatGPT usage could result in $3 billion to $11 billion in sales for Nvidia over 12 months.
"We believe Nvidia has in ChatGPT a potentially meaningful compute demand driver," Citi analyst Atif Malik said in a note to clients last week.
Nvidia Called Strong In AI Computing
Further, Truist Securities analyst William Stein on Monday upgraded his view of semiconductor stocks to positive from neutral. He sees the most upside potential for buy-rated semiconductor stocks Nvidia, Monolithic Power Systems and Onsemi.
"Near-term fundamentals are still eroding; we are not basing our stock preference on near-term results," he cautioned in a note to clients.
Stein likes Nvidia for its presence in AI computing. He is positive on Monolithic for share gains in analog chips, and Onsemi for adoption of silicon carbide chips in electric vehicles and other power applications.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
