‘Fundamental bottom’ is coming for chips, and this stock could be the biggest winner, analyst says
After a semiconductor shortage flipped into a glut in 2022, chip stocks are headed for a strong entry point and will lead the broader market in the new year, with Nvidia Corp. the best pick among them, an analyst wrote Thursday.
Evercore ISI analyst C.J. Muse said he expects the beleaguered chip sector to turn around with a soft landing, having bottomed out in mid-October, when the SOX index hit 2,162, its lowest level since mid-September 2020. A “fundamental bottom,” however, should play out over the next three to six months, he wrote, “with a clear path to soft-landing in sight and 1-2 more cuts.”
Semiconductor stocks, however, lagged behind the broader market on a rough day Thursday, as the PHLX Semiconductor Index SOX dropped 4%, compared with a 2.9% decline on the S&P 500 index SPX and a 3.4% fall on the tech-heavy Nasdaq Composite Index COMP . Nvidia, Marvel, and ASML shares fell about 5%, while Analog Devices, Wolfspeed and Broadcom were all down around 3%.
“Tactically,” Muse also likes chip-equipment makers Applied Materials Inc. AMAT and Lam Research Inc. LRCX into the first quarter of 2023 on positive estimate revisions. Muse has outperform ratings on both stocks.
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