Semiconductor stocks had a remarkable comeback in 2023, recovering from a period of underperformance during the pandemic. The PHLX Semiconductor index (Sox) surged by 65% in 2023, outperforming the S&P 500. Industry experts predict that this positive trend will continue in 2024, signaling the start of a potential upcycle.
The success of previous upcycles in the semiconductor sector adds credibility to these predictions. According to BofA, the average return during the last three upcycles in the Sox index was 67%. Factors such as the increasing demand for artificial intelligence infrastructure, growing chip design complexity, and the integration of chips in vehicles are expected to drive this upcycle forward.
Analysts from UBS and BofA are particularly optimistic about the memory chip sector. This is in line with the rising prominence of artificial intelligence, where memory chips play a crucial role. High-performance memory, for example, is used in Nvidia’s graphics processing units (GPUs), which are essential for generative AI tools.
With a focus on the top semiconductor picks for 2024, analysts from UBS, BofA, Wolfe Research, KeyBanc Capital Markets, and Mizuho have named Micron as one of their top choices. Micron is anticipated to benefit from the recovery of dynamic random access memory (DRAM) and NAND in 2025. Wolfe Research projects a revenue growth of 42% for Micron based on a substantial increase in DRAM and NAND demand.
Despite a significant rise in 2023, Nvidia remains a top pick for 2024. KeyBanc believes that Nvidia is best positioned to capitalize on the growing demand for generative AI. It also highlighted Nvidia’s market dominance, established ecosystem, and leadership in silicon performance. Similar sentiment was expressed by Wolfe, further emphasizing the company’s potential for long-term growth.
In terms of selectivity, analysts from Bernstein recommend considering Broadcom as a top pick. Its strong AI story, impressive financial performance, and attractive valuation make it an appealing choice. Mizuho also recognizes Broadcom’s industry leadership and strength in various semiconductor segments, including broadband, software, wireless, and networking tech.
Taiwan Semiconductor Manufacturing Company (TSMC), according to Bernstein, is the best idea for 2024 among Asian semiconductors. The company’s N3P product is expected to rival Intel’s similar product, providing TSMC with a competitive advantage. Additionally, UBS anticipates a rebound for TSMC in 2024, driven by factors such as cloud AI, edge AI, and the growth of smartphone, PC, and Internet of Things markets.
Overall, the positive outlook for semiconductor stocks in 2024 is supported by the industry’s strong performance in 2023 and the potential for continued growth driven by emerging technologies and market demand.
The source of the article is from the blog crasel.tk