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7 Semiconductor Stocks Citi Likes Ahead of Q1 Earnings

Barchart - Fri Apr 19, 7:41AM CDT

The artificial intelligence (AI) megatrend may have slowed a bit recently, but AI isn't going anywhere. In particular, the semiconductor industry is expected to be a key beneficiary of continued growth, with robust AI sales helping to offset softer smartphone demand in Taiwan Semi's (TSM)latest quarterly results. Projected to reach a market size of $1.14 trillion by 2033, it would be safe to say that semiconductor stocks are poised for significant upside from current levels.

That said, after a year packed with blowout earnings beats in 2023, analysts at Citigroup (C) are expecting a more “muted” performance as Wall Street prepares for Q1 earnings reports from semi stocks. The brokerage firm thinks under-the-radar Microchip (MCHP) is particularly well-positioned right now - but also named a number of other stocks in the group that it still considers “Buy”-worthy. Here's a closer look at 7 top chip picks from Citi.

1. Micron

Founded in 1978, Micron (MU) is a chip company that manufactures computer data storage and memory devices. Their products include memory cards, solid-state drives, and multi-chip packages among others. Micron invests heavily in research and development to stay ahead of the curve in memory and storage technology. This ensures they can offer the most advanced and efficient products to their customers. The company commands a mammoth market cap of $123.9 billion.

Micron stock is up 31.2% on a YTD basis, and the stock offers a dividend yield of 0.4%.

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MU is Citi's top pick in the chip space, and analysts have a consensus rating of “Strong Buy” for the stock overall, with a mean target price of $125.53. This indicates an upside potential of about 12.2% from current levels. Out of 28 analysts covering the stock, 24 have a “Strong Buy” rating, 2 have a "Moderate Buy" rating, 1 has a “Hold” rating, and 1 has a “Moderate Sell” rating.

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2. AMD

Based out of Santa Clara, Advanced Micro Devices (AMD) is a major player in the semiconductor industry. It manufactures CPUs, GPUs, semi-custom chips, and motherboards, and offers server processors (EPYC) for data centers, too. AMD currently commands a market cap of $250.6 billion.

AMD stock is up 5.2% on a YTD basis.

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Ahead of AMD's April 30 earnings release, Citi analyst Christopher Danely said that the firm “does not expect the Dr. Lisa Su-led AMD to raise its forecast for artificial intelligence revenue until the summer.” 

Analysts consider AMD a “Strong Buy” overall, and the mean target price of $193.79 indicates an upside potential of roughly 25% from current levels. Out of 34 analysts covering the stock, 28 have a “Strong Buy” rating, 1 has a “Moderate Buy” rating, and 5 have a “Hold” rating.

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3. Nvidia

The poster child of the generative AI revolution, Nvidia (NVDA) was founded in 1993 by current CEO Jensen Huang, Chris Malachowsky, and Curtis Priem. Known primarily for its prowess in producing GPUs, Nvidia's operations also include data center solutions, professional visualization, gaming technologies, and emerging technologies. Driven by its massive rally in recent years, Nvidia's market cap currently stands at a towering $2.1 trillion.

In 2024, Nvidia stock is up 70.9% so far.

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Overall, analysts rate NVDA stock a “Strong Buy,” with a mean target price of $931.98 - which denotes an upside potential of about 10% from current levels. Out of 39 analysts covering the stock, 34 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, and 3 have a “Hold” rating.

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4. Broadcom

Created in 2016 when Avago Technologies merged with Broadcom Corporation in a $37 billion deal, Broadcom Ltd (AVGO) is a major player in the semiconductor industry, designing and supplying a wide range of products including wired infrastructure semiconductors, wireless communication semiconductors, enterprise storage solutions, and industrial and semiconductor solutions. Its market cap currently stands at a sizeable $583.4 billion.

AVGO stock is up 12.7% on a YTD basis, and it also offers a dividend yield of 1.56%.

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Wall Street analysts have deemed AVGO stock a “Strong Buy” overall, with a mean target price of $1,518.46. This denotes an upside potential of roughly 20.6% from current levels. Out of 27 analysts covering the stock, 24 have a “Strong Buy” rating and 3 have a “Hold” rating.

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5. Marvell Technology

Founded in 1995 and based out of Delaware, Marvell Technology (MRVL) designs and develops a variety of semiconductor solutions that power various technologies, including storage controllers, networking solutions, wireless connectivity, ethernet controllers, and custom SoCs (System-on-a-Chip). Its market cap currently stands at $56.5 billion.

MRVL stock is up 8.2% on a YTD basis, and it offers a dividend yield of 0.36%.

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Analysts have a consensus rating of “Strong Buy” for MRVL, with a mean target price of $88.19. This indicates an upside potential of about 35.2% from current levels. Out of 28 analysts covering the stock, 25 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, and 1 has a “Hold” rating.

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6. Lam Research

Based out of California, Lam Research (LRCX) was established in 1980. It is a leading supplier of wafer fabrication equipment used in the creation of integrated circuits (ICs), the tiny chips that power most electronic devices. Their core focus lies in Etch Systems, Deposition Systems, Cleaning Systems and Services. Its market cap currently stands at $116.5 billion.

LRCX stock is up 13.5% on a YTD basis, and its dividend yield is currently 0.87%.

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Lam Research has garnered an overall rating of “Moderate Buy,” with a mean target price of $926.38 - which denotes an upside potential of about 4.2% from current levels. Out of 26 analysts covering the stock, 14 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, and 10 have a “Hold” rating.

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7. Applied Materials

Founded in 1967 and based out of Santa Clara, Applied Materials (AMAT) is a giant in the semiconductor equipment industry, providing essential tools used in the fabrication of ICs. Their products enable the creation of the tiny chips that power our electronic devices. Its market cap currently stands at $161.5 billion.

AMAT stock is up 19.9% on a YTD basis, and it offers a dividend yield of 0.66%.

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Applied Materials stock has been deemed a “Moderate Buy” by the analyst community. The mean target price of $211.83 implies an upside potential of about 9% from current levels. Out of 30 analysts covering the stock, 19 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, 8 have a “Hold” rating, and 1 has a “Strong Sell” rating.

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On the date of publication, Pathikrit Bose did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.

Provided Content: Content provided by Barchart. The Globe and Mail was not involved, and material was not reviewed prior to publication.

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