With earnings on tap, expectations for large chip manufacturers are rising

With earnings on tap, expectations for large chip manufacturers are rising

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A non-stop parade of technical earnings reports is ready to start rolling in next time week, and semiconductor companies are in the spotlight of what has been a tumultuous start to the year.

After showing signs of improvement in late 2021, the chip sector has been affected by a number of high-profile factors ranging from rising Federal Reserve interest rates, ongoing supply chain problems and the overhang of Russia’s unprovoked war against Ukraine. But some analysts covering the semiconductor industry said the upcoming earnings season should illustrate that there are opportunities among some of the sector’s bell-ready names.

“While trends remain volatile, most of the time is with a Fed tightening [of interest rates]shares are doing well for six months, “said Louis Miscioscia of Daiwa Securities.” We think a recovery will repeat itself. “

Miscioscia said that despite the broader problems that weigh on the chip sector, the “positive fundamentals” of the industry have not changed. Miscioscia pointed to what he called “materials technology drivers” that have an impact on the chip sector: Artificial intelligence and industrial automation, games, cloud computing, 5G wireless, electric vehicles and advanced driver assistance systems and new demands from companies as employees begin to return to the office.

“We believe that positive technological demand will ultimately result in good growth,” Miscioscia said, adding that stock prices should rise throughout the year.

Miscioscia said that heading into the upcoming earnings season, his “top picks” include Advanced Micro Devices (NASDAQ: AMD) and Apple (NASDAQ: AAPL). Miscioscia said AMD (AMD) “wins in the cloud at Intel (INTC)’s expense”, while Apple (AAPL), which expects its quarterly revenue growth to slow on an annual basis, still has prospects that are “very good” across the board with many positives for [the] iPhone, Mac, wearable and [the] iPad. “

Nvidia (NASDAQ: NVDA) and Qualcomm (NASDAQ: QCOM) also landed on Miscioscia’s top list. Miscioscia said one thing in Nvidia’s (NVDA) long-term favor is the possibility of software in the metaverse, which he called “something infinite, and the likely government restrictions and opposition for a semiconductor company. [are] much more limited. “

For Qualcomm (QCOM), Miscioscia cited the communications chip maker as having “a range of growth drivers” in addition to 5G mobile phones. Miscioscia said that while 5G phones “lead the way” for Qualcomm (QCOM), the company is “in a strong position for IoT [Internet of Things] cycle to connect everything, especially where the need is for 5G. “

While Miscioscia was optimistic about AMD (AMD), Apple (AAPL), Nvidia (NVDA) and Qualcomm (QCOM), he was a little more reticent about the chip giant Intel (INTC).

Miscioscia said that among the “many concerns” about Intel (INTC) is that in some areas it is lagging behind in technology for AMD (AMD) and Taiwan Semiconductor (TSM) and is losing market share in its data-centric business to AMD (AMD). and “hyperscale cloud vendors” that design their own processors based on ARM technology.

Chip inventories received a boost in the past week as semiconductor equipment manufacturer ASML Holding (ASML) reported better-than-expected quarterly results and expected revenue growth in the coming months.

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