How to invest in chip stocks? First choice for Fuguo Bank: Micron Tech
Wells Fargo stated that although companies like NVIDIA and AMD are convincing in terms of "current level and popularity," Micron Tech is its preferred choice in the semiconductor field. Wells Fargo expects that the storage segment of the semiconductor industry will grow by 69% and 15% YoY by 2024 and 2025, respectively, which will benefit Micron Tech. Analysts also noted that the momentum of data center spending continues to be driven by artificial intelligence. In addition, Wells Fargo considers Arm Holdings, Cadence Design Systems, and Synopsys as "core long-term holdings."
Zhitong App has learned that on Wednesday, Wells Fargo Bank stated that despite the convincing "current level and popularity" of companies such as NVIDIA and AMD, Micron Tech is its preferred choice in the semiconductor field. Analysts led by Aaron Rakers wrote in a report to clients, "The long-term expansion of generative artificial intelligence will continue (although it will slow down in the second half of 2024). However, we expect some rotation of companies that are more sensitive to the cycle to occur in 2024."
Wells Fargo Bank predicts that the storage segment of the semiconductor industry will grow by 69% and 15% YoY in 2024 and 2025, respectively, which will benefit Micron Tech. It is estimated that the total semiconductor sales in 2024 and 2025 will be approximately USD 645 billion and USD 718 billion, with YoY growth of 17% and 11%, respectively.
With the recent decline in the stock prices of AMD and NVIDIA, Wells Fargo Bank is optimistic about these two companies, especially as data center spending continues to be driven by artificial intelligence. Analysts wrote, "The momentum of artificial intelligence development is continuing, and spending on (traditional) servers will shift towards inference and training + recovery, which will drive strong growth in servers in 2024."
Analysts predict that revenue from server CPUs and GPUs will grow by 33% YoY, while dynamic random-access memory for servers is expected to grow by over 100% this year. The company pointed out that in the entire third quarter, shipments of server CPUs from Intel and AMD decreased by 34% YoY, while server shipments decreased by 21%.
Wells Fargo Bank stated that Arm Holdings (ARM.US), Cadence Design Systems (CDNS.US), and Synopsys (SNPS.US) are "core long-term holdings," and views ON Semiconductor (ON.US) as a "favored large and medium-cap stock," while Allegro MicroSystems (AGM.US) is considered the company's most favored small-cap stock. In addition, Wells Fargo Bank downgraded the ratings of chip manufacturers Ambarella (AMBA.US) and MaxLinear (MXL.US) on Wednesday.