Semiconductors are staging a comeback.
The SMH Semiconductor VanEck ETF is up more than 7% over the last month, and has gained nearly 52% since the market bottom on March 23. However, two experts say now’s the time to be picky with the group.
“We’re in the middle of a technological revolution, and the pandemic has really accelerated it,” said Michael Bapis, managing director of Vios Advisors at Rockefeller Capital Management. “But in the space, I think it’s company specific.”
Two stocks in the sector Bapis likes right now are Intel (NASDAQ: INTC) and Nvidia (NASDAQ: NVDA). Both stocks are up by double digits since the March 23 market bottom with Intel shares up just under 31% since then, and Nvidia shares up nearly 86%.
Bapis believes both stocks could lead the space and said their innovation is reason enough to be bullish on the stocks. He said Intel and Nvidia “have stable earnings and their earnings have not changed that much given this pandemic, and I think with the possibility of factories coming back to the U.S. and with the evolution of working from home and everything that we need for mobile technology, you’re just going to see these companies and probably most in the space continue to be strong for the foreseeable future.”
KeyBanc Capital Markets analyst Weston Twigg upgraded Intel this week to from Sector Weight to Overweight with a target price of $82 – 36% higher than the price as of this writing.
Twigg wrote in a note that Intel’s “shift to greater image and video processing, voice recognition and natural language processing, and smart technologies has accelerated the demand for creating machine learning algorithms (training) and therefore an even greater need for inference (using these trained models to make predictions).”
The KeyBanc analyst also argued that Intel looks inexpensive compared to rivals, trading at 12 times 2021 estimated earnings, compared to Nvidia, which trades at 37 times forward earnings.
BMO Capital analyst Ambrish Srivastava, however, likes Nvidia and recently upgraded the stock from Market Perform to Outperform with a price target of $425 as the company enters “beast mode.”
“While there is no one single event we can point to which has led us to change our thinking, the continued execution on the data center side, along with the latest product rollout has helped,” Srivastava wrote in a note. “We believe Nvidia is uniquely positioned to continue to benefit from a massive shift int he compute landscape.”
Aside from Intel and Nvidia, Oppenheimer head of technical analysis Ari Wald says Dutch chipmaker ASML Holding (NASDAQ: ASML) is setting up for a big move higher.
ASML shares are up 61% since the market bottom.
“Great looking chart right there,” Wald said of ASML, pointing to the stock breaking higher above its February peak. “We see that as a sign of relative strength, and a sign of continued gains.”