A non-stop parade of tech earnings reports is set to start rolling in next week, and semiconductor companies are on tap to be in the spotlight following what has been a tumultuous start to the year.
After showing signs of recovery in late 2021, the chip sector has been impacted by a slate of high-profile factors ranging from the Federal Reserve raising interest rates, ongoing supply chain issues and the overhang of Russia’s unprovoked war against Ukraine. But, some analysts that cover the semiconductor industry said that the upcoming earnings season should illustrate that there are opportunities among some of the sector’s bellwether names.
“Even though trends remain volatile, the majority of the time with Fed tightening [of interest rates], stocks do well six months out,” said Louis Miscioscia, of Daiwa Securities. “We think a rebound will repeat itself.”
Miscioscia said that despite the wider issues weighing on the chip sector, the “positive fundamentals” of the industry haven’t changed. Miscioscia pointed to what he called “material tech drivers” that are having an effect on the chip sector: Artificial intelligence and industrial automation, gaming, cloud computing, 5G wireless, electric vehicles and advanced driver assistance systems, and new demands from enterprises as employees begin returning to the office.
“We believe the positive tech demand will eventually result in good growth,” Miscioscia said, adding that share prices should rebound through 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) is “winning in the cloud at Intel’s (INTC) expense,” while Apple (AAPL), which expects its quarterly revenue growth to be slower on a year-over-year basis, still has prospects that are “very good across the board with many positives for [the] iPhone, Mac, services wearable and [the] iPad.”
Nvidia (NASDAQ:NVDA) and Qualcomm (NASDAQ:QCOM) also landed on Miscioscia’s top picks list. Miscioscia said one thing in Nvidia’s (NVDA) favor over the long term is the opportunity for software in the metaverse, which he called “somewhat endless, and the likely government restrictions and resistance for a semiconductor company [are] much more limited.”
For Qualcomm (QCOM), Miscioscia cited the communications chipmaker as having “a number of growth drivers” beyond 5G cellphones. Miscioscia said that while 5G handsets “are leading the way” for Qualcomm (QCOM), the company “is in a strong position for the IoT [Internet of Things] cycle to connect everything, especially where the need is for 5G.”
While Miscioscia was upbeat about AMD (AMD), Apple (AAPL), Nvidia (NVDA) and Qualcomm (QCOM), he was little more reticent about chip giant Intel (INTC).
Miscioscia said that among the “many concerns” surrounding Intel (INTC) are its falling behind in technology, in some areas, to AMD (AMD) and Taiwan Semiconductor (TSM), and losing market share in its data centric business to AMD (AMD) and “hyperscale cloud vendors” that are designing their own processors based on ARM technology.
Chip stocks got a lift this past week as semiconductor equipment maker ASML Holding (ASML) reported better-than-expected quarterly results and forecast revenue growing in the months ahead.