KeyBanc Capital Markets isn’t seeing a rebound in the semiconductor industry just yet. But even in tough times, there are winners and losers.
“Our quarterly supply chain findings are mixed,” analyst John Vinh wrote in a note to clients on Monday. “China remains weak and hasn’t recovered…. Feedback from Asia indicates demand more broadly remains muted.”
However, the analyst said investors can find solace that business is at least “not getting meaningfully worse.” And two companies are outperforming in the soft environment.
Vinh raised his revenue estimates for
Nvidia
(ticker: NVDA) and
Intel
(INTC), citing improving product demand.
Nvidia
shares were down 2.1%, at $438.23, in recent trading, while Intel stock was rising 1.5%, at $36.00. The
S&P 500 index
was down 1.5%.
Nvidia benefits from growing interest in generative AI and a mix shift toward the company’s higher-end, more expensive H100 datacenter chip, Vinh argues.
Demand for AI servers that incorporate the company’s chips is “extremely robust,” he says. He reiterated his Overweight rating for Nvidia shares and raised his price target to $750 from $670.
“Nvidia remains uniquely positioned to benefit from AI/ML [machine learning] secular data center growth,” he wrote. “We see limited competitive risks and expect Nvidia to continue to dominate one of the fastest-growing workloads in cloud and enterprise.”
Generative AI products train on text, images, and videos to create content. Interest in this type of AI has been sparked by OpenAI’s release of ChatGPT late last year.
Intel isn’t Nvidia, but the company has pockets of strength. Vinh reaffirmed his Sector Weight rating on the chip maker and said the stock’s fair value is $35. He doesn’t have an official price target for the stock.
Vinh notes that the Intel’s latest server chip, Sapphire Rapids, is starting to ramp in “meaningful volume” and PC demand isn’t deteriorating—both of which are positive signs for the company. He increased his revenue estimate to $53 billion this year from $52.3 billion.
Write to Tae Kim at [email protected]
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