Nvidia, Marvell, Micron, Broadcom among top semiconductor stocks at UBS
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Nvidia (NASDAQ:NVDA), Marvell Technology (NASDAQ:MRVL), Micron (NASDAQ:MU) and Broadcom (NASDAQ:AVGO) are listed among investment firm UBS's favorite semiconductor stocks, even as weakening consumer demand and confidence and rising inventories are hurting the sector.
Analyst Timothy Arcuri noted that there is the possibility that order cancellations start and supply continues to improve as the probability for an economic "hard landing" grows. And while it may be too early to turn positive on the sector as a whole and valuations could still go lower, there are some companies that are poised to do better than others.
The analyst noted that consumer markets have "rapidly weakened," but the data center demand is still strong, even as companies like Nvidia (NVDA) slow the pace of their operating expenses. The spending outlook is still favorable due to workload growth, the continued shift to artificial intelligence and new CPU product cycles. There are also positives for other sectors, as the launch of a new iPhone later this year could help the smartphone market, which has been beleaguered by Chinese weakness. â
Nvidia: Arcuri likes Nvidia (NVDA) as it builds "more stable revenue sources" around its GPU and software moats and the strength in the data center that has been talked about recently could be strong enough to provide a cushion if there is a correction in gaming.
Marvell: Marvell (MRVL) is favored because of its "broad" portfolio and its investments in 5 nanometer node to go into several new applications and opportunities.
Micron: Micron (MU), which recently reported quarterly results that missed estimates, is viewed in a positive light because it "cleared the decks to some degree" thanks to its weak guidance and commitment not to burn cash. 
Lam Research: Lam Research (LRCX) is viewed favorably in the semiconductor production equipment space because memory headwinds are starting to abate and the risks are shifting to foundries, where it has "relatively little exposure."
Broadcom: Broadcom (AVGO) is viewed as a favorite of income investors, as it is a "compounder with some cyclical downside protection."
Others that are viewed favorable include Analog Devices (ADI) and to some extent Intel (INTC), as Arcuri notes it is starting to "close the competitive gap" on Advanced Micro Devices (AMD) for process technology, but a weak PC environment and lack of government subsidies could force Intel to burn a "substantial" amount of cash in 2022 and 2023.
Last month, investment firm Morgan Stanley restarted coverage on Advanced Micro Devices (AMD) shares, noting it is in a position to gain market share in both cloud servers and PCs.