Intel, AMD stand out as chip expectations remain mild
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Anyone looking for a swift turnaround in the semiconductor market should probably temper their expectations and not get too far ahead of themselves, according to an assessment of the state of the sector by analyst Srini Pajjuri Raymond James.
Pajjuri said that after meeting with more than 20 tech supply chain companies in Taiwan and South Korea, the business conditions for the chip market in the near term "appear mixed", with signs of a recovery differing depending on the specific product market for chips.
According to Pajjuri, the PC, TV and smartphone markets are showing signs of reaching a market bottom, while data center orders "appeared to have weakened further in the past few weeks." Pajjuri said that PC and TVs were the first to improve last year, and are now "seeing early signs of a recovery, including some rush orders". When it comes to smartphones, Pajjuri said an inventory correction appears to be "largely behind" the market, but that orders for components are still "muted."
Meanwhile, Pajjuri said that when it comes to chips in the data center, "suppliers saw broad-based order cuts as recently as March", even though enthusiasm for servers used in artificial intelligence "remains high."
Pajjuri said the memory chip market is "still weak", and has seen weaker-than-expected pricing trends during the first quarter of this year.
With regard to specific chip companies, Pajjuri raised his price target on Intel (NASDAQ:INTC) to $33 a share from $30, while leaving his outperform rating on the chip giant's stock unchanged. Pajjuri also raised his price target on Advanced Micro Devices to $115 a share from $110, and kept his strong buy rating on the stock.
For Intel (INTC), Pajjuri said "the near-term bar is low for the PC segment," and he is "encouraged" by signs of a recovery in its commercial market business. With regard to AMD (NASDAQ:AMD), Pajjuri said the chipmaker is seeing some early signs of recovery in its PC business, and strength in its FPGA products, which are chips that allow customers to configure to their own needs after being purchased.
Pajjuri also reiterated his strong buy rating on Nvidia (NVDA). The graphics chipmaker was set to go into details about its AI technologies as it started its annual GTC event on Monday.