Semiconductors are one of the modern world’s essential industries, making possible so much of what we rely on or take for granted: billion people own at least one smartphone. That’s 1 in 3 of the world population, enough to ensure that demand for semiconductor chips will never slacken.access, high-speed computers with high-speed memory, even the thermostats that control our air conditioning – there isn’t much, tech-wise, that doesn’t use semiconductor chips. The was valued at over $513 billion in 2019, and despite the worst, the pandemic could do, the chip sector rose to $726 billion in 2020. It’s a market based on a near-limitless customer base; it’s estimated that 2.5
And with that background, Raymond James analyst Chris Caso sees two chip giant poised to make gains this– but one that investors should avoid. Let’s take a closer look. Advanced Micro Devices (AMD) The first – by sales – globally. The company held the fifteenth spot , with $9.76 billion in total revenues. That full line was up 45% from 2019, when AMD was ranked eighteenth.
AMD’s position in the industry is based on its high-quality products, including microprocessors, motherboard chipsets, and graphics processors. AMD’s Ryzen Mobile 4000 chip was the first 7nm x86 processor on the market. The chip company showed a solid second half in 2020, with revenues in Q3 and Q4 rapidly recovering from the 1H20 dip and rising above 2019. Earnings in Q4 skyrocketed, growing from Q3’s 32 cents per share to an impressive $1.45 per share.
For all of 2020, earnings came in at $2.06, compared to 30 cents for 2019. The strong second half pushed the full-year revenue to a company record on expanding demand in the PC, gaming, and data center markets. AMD’s prospects have attracted Raymond James’ Chris Caso, who compares the company favorably to competitor Intel.
“We are using the pullbackto get involved with AMD, which we expect to be a secular winner due to what we believe to be a durable technical advantage vs. Intel. We think the improved sentiment has driven the stock’s pullback that Intel will solve its manufacturing challenges, whichreversings successes. We’re taking the other side of that view,” the 5-star analyst noted. Caso continued, “Now that Intel has committed to internal manufacturing, we think it’s unlikely that Intel ever regains a transistor advantage vs. AMD. The current roadmaps ensure an advantage for AMD/TSMC through at least 2024.
In the meantime, we think Street numbers are too low for both server and consoles, putting our base case 2022 EPS estimate of $2.81 12% ahead of the Street, with an upside case to about $3.00.” In line with this outlook, Caso initiated coverage of AMD with an Outperform (i.e., Buy) rating and a $100 price target to suggest a 23% one-year upside potential. (To watch Caso’s track record, click here) The Raymond James view is no bullish outlier; AMD has 13 positive reviews. These are partly balanced by 5 Holds and 1 Sell, making the analyst consensus .
The share is selling for $81.11, and their $104.44 average price target implies an upside of ~29% for the. (See AMD stock analysis on TipRanks) Nvidia Corporation (NVDA) Next up, Nvidia is another of the chip industry’s giants. Like AMD, Nvidia is slowly rising in the rankings; going by total sales, the company was rated number 10 in 2019 – and number 8 in 2020. Nvidia’s sales totaled more than $16 billion, a gain of 53% year-over-year.
Nvidia rode to its success on the combination of memory chips – a strong market in the data center segment – and graphics processors –hardcore gamers and professional graphic designers. For the most recent quarter, Q4 of fiscal 2021, ending on December 31, Nvidia reported $5 billion in revenue, a company record, and a 61% gain from the year before. Full year numbers were strong; the $16.68 billion at the , and the EPS, at $6.90, was 53% higher than the previous year. EPS rose from $1.53 in the prior Q4 to $2.31 in the current print, a gain of 51%.
Company management noted the strength of the data center segment but also pointed out that Nvidia has a growing AI business. The company makes between 5% and 10% of its total sales in the automotive market, and more than half of that is AI-related, in the niche. Raymond James’ Chris Caso notes this, too, in his report upgrading his stance on NVDA. “Our new, as we’ve been positive on NVDA for some time. Our call rather is meant to express our conviction in both the short and long term.
In the short term, we think NVDA results will depend more on–and we expect total supply as the year progresses…. Our longer term conviction is driven by the fact that NVDA has more shots on goal than in our coverage, and their success in AI has earned them a permanent seat at the table in both hyperscale and enterprise compucomputingso opined. Caso bumps his stance up from Outperform to Strong Buy, and target of $750. At current levels, this indicates room for a 17% one-year upside.
NVDA’s strong share appreciation over the past 12 months (115%) has pushed theclose to the average price target. Shares are selling for $614.47, with an intermediate mark of $670.20 suggesting room for 9% growth. Nonetheless, the stock holds a Strong Buy consensus rating based on 22 Buys and 4 Hold given in recent weeks. (See NVDA stock analysis on TipRanks) Intel Corporation (INTC) The third stock we’re looking at, Intel is the one that Raymond to avoid.
This may seem counterintuitive; Intel is, by sales, the world’s largest semiconductor chip maker, with more than $77 billion in annual revenue last year and a market share, and a shifting landscape in the data center that will make the industry less dependent on Intel,” Caso explained.. So why does Caso advise caution here? “Intel’s stock has risen of late due to optimism that new leadership from their very capable new CEO will allow them to turn around their manufacturing issues and return to their former dominance. Our Underperform rating reflects not just the risk that Intel won’t reach that goal but also the pain they will likely endure in pursuit of that goal in terms of capex, lost
The analyst added, “In adWe’reerned that demand in the PC market, on which Intel remains highly dependent, has been significantly pulled forward due to the pandemic, and expect an eventual mean reversion – which may, unfortunately, occur just as Intel needs to ramp investment.” Overall, the market’s current view on INTC is a mixed bag, indicating uncertainty about its prospects. Caso, as noted, rates INTC an Underperform (i.e., Sell) and does not put a price target on it.’
Overall, a newly launched tool that unites all of TipRanks’ equity insights. Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your analysis before making any investment.is based on 12 Buys, 10 Holds, and 8 Sells. Maboutile, the $67.68 price target suggests a modest upside potential of nearly 6%. (See INTC stock analysis on TipRanks) To find good chip ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a