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Semiconductor stocks bounced back from the post-pandemic slump in 2022 and had a strong year in 2023. The PHLX Semiconductor Index (Sox) index rose 65% in 2023, significantly outperforming the S&P 500 index. BofA says it’s bullish on the sector. We predict that 2023 will be a strong year and could be the beginning of an upcycle. In a Jan. 10 memo, it said the past three up cycles have boosted the Sox index’s average return by 67%. The bank pointed to tailwinds such as artificial intelligence infrastructure, increasing complexity of chip designs, and chip content in vehicles. UBS said in a note dated Jan. 10 that it is optimistic about the memory chip sector. With the advancement of AI, memory chips are attracting attention. For example, Nvidia’s H100 graphics processing unit uses memory with high performance and bandwidth. GPUs power most generative AI tools. “AI will continue to ‘lift all boats’ for DRAM stocks,” the company said. DRAM (Dynamic Random Access Memory) is a type of semiconductor memory needed for data processing. CNBC Pro took a deep dive into January’s Wall Street survey to identify analysts’ top semiconductor picks for 2024. Micron Analysts from UBS, BofA, Wolf Research, KeyBanc Capital Markets and Mizuho named Micron one of their top picks. Wolfe Research says Micron is likely to benefit from a strong recovery in 2025 when it comes to DRAM and NAND. NAND is another type of memory that continues to operate without power. Wolfe’s bullish scenario assumes DRAM to grow 40% year-over-year and NAND to grow 50% year-over-year, with Micron’s overall revenue growth reaching 42% year-over-year in 2025. BofA, KeyBanc and Mizuho gave Micron a price target of $100, or about 20% upside. Nvidia Despite Nvidia’s impressive 239% growth in 2023, some still list his Nvidia as one of his top contenders this year. KeyBanc says this “remains the sweet spot for generative AI.” KeyBanc said, “We expect the outsize tailwinds for AI to continue in 2023, supported by rising demand balances and increasing supply, despite significant price increases (+239%).” “NVDA’s dominant market position, mature ecosystem, and leadership in silicon performance will position NVDA to benefit from strong demand for genAI and its $150 billion. [total addressable market] Wolff said NVIDIA is on the company’s “alphalist” given his confidence in the company’s earnings over the next few quarters and the long-term opportunity from its AI advantage. KeyBanc has a $650 price target for the company, while BofA has a $700 price target, implying potential upside of about 18% and 27%, respectively. The company said its advantages could generate $100 billion in free cash flow growth over the next two years, making it a top contender in the sector. Bernstein said in a Jan. 4 memo that the semiconductor industry will need some “selectivity” this year, citing a strong AI story, “tremendous” financial performance and an attractive valuation. For this reason, he named Broadcom as the most likely candidate. Mizuho said Broadcom “continues to be an industry leader” and continues to show strength in its broad semiconductor portfolio, including broadband, software, wireless (iPhone) and networking technologies. % upper value. TSMC Bernstein called Taiwan’s TSMC “the best idea of 2024” in a January note on Asian semiconductors. We gave TSMC an Outperform rating and a price target of NT$750 ($24). Bernstein said he supports TSMC’s claim that its N3P semiconductor process technology is more competitive than Intel’s similar product, 18A. Regarding CPU cores, Bernstein said, “I would argue that TSMC will become even more competitive, but the best evidence would be if Intel expands its outsourcing to TSMC to include CPU compute tiles.” Ta. The company said this is one of the reasons it named TSMC the best idea of the year. UBS said TSMC is “positioned for a strong recovery” in 2024. “We believe TSMC is in the best position for growth over the next 18 months,” the bank said, citing factors such as cloud AI, edge AI and from the smartphone, PC and Internet of Things markets. —CNBC’s Michael Bloom contributed to this report.
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