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While caution persists throughout the semiconductor industry, Wells Fargo chose Advanced Micro Devices (NASDAQ:AMD) and Nvidia (NASDAQ:NVDA) among its top chip stocks for 2023 amid optimism in certain sectors of the industry.
“We enter 2023 with a consistently cautious view of the semiconductor cycle as a whole, adding that future expectations are high,” Wells Fargo analysts wrote in a note to clients. The future has not yet been “adequately reduced risk”.
“That said, we believe the bottom of the bear cycle could be established as we move through [the first-half of 2023],” wrote Wells Fargo analysts.
However, the Wells Fargo team added that investors should be “cautious and invested” in high-quality and long-term growth stories, including artificial intelligence, electronics design automation and umbrellas bowl.
Analysts find investor sentiment too negative for AMD (AMD) as investors underestimate the increase in CPU market share in the server space and AMD’s (AMD) Genoa’s 96-core EPYC product cycle is growing, and its 128-core Bergamo EPYC products will launch in the first half of this year.
“We model AMD to achieve [five percentage points] of increased server CPU share through 2023” with gains expected to outweigh losses, analysts wrote of the company’s top overall pick.
They also note that the estimate for AMD (AMD). with the same period last year in the first half of the year and 16% through 2023.
Nvidia (NVDA) is also seen on a positive note, Wells Fargo said, largely due to its data center product cycle getting better this year and overwhelming investor sentiment around “the scope of the market.” strategically important/platform” Grace/Grace’s 144-core Arm-based Hopper super chip launched in the first half of this year.
The Wells Fargo team said that with (NVDA) Lovelace GeForce RTX-4xxx product life cycle, “We think Nvidia can continue to give investors confidence in the bottoming game segment” and potential for channel re-supply production will begin in the first half of this year.”
They added that Nvidia’s (NVDA) the ability to generate revenue from software is likely to be more evident this year, while the company’s auto business could see an inflection point.
Analysts also highlight Micron Technology (NASDAQ:MU), but said this is a story for the second half of the year, given how weak the memory industry is right now.
“We continue to see data center and automotive as important long-term growth drivers in memory,” the Wells Fargo analysts wrote, adding that cutting bit production and Depleting inventory “still has a long way to go.”
Other names that Wells Fargo favors are Marvell Technology (NASDAQ:MRVL), Rhythm Design System (College of Arts), summary (SNPS), NXP Semiconductor (NXPI), wolf speed (WOLF), Ambarella (AMBA), Allegro Microsystem (AGM) and Rambus (yuan).
Semiconductor companies tied to the smartphone space are likely to underperform in a “risky market”, with the company reiterating its lower rating on Qualcomm (QCOM).
In December, UBS said it was optimistic about the chips coming out in 2023, choosing Nvidia (NVDA) is one of its top picks, as it forecasts construction momentum in the second half of the year.
