Nvidia, Broadcom, Arm, others seen as best places in semis going into Q3: BofA
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Investment firm Bank of America put out a research note on Tuesday on the wider semiconductor industry going into third-quarter earnings season and the firm sees areas such as high compute and cloud computing and chip design as the best places for investors.
A group of analysts, led by Vivek Arya, said the firm's framework suggests adding to places of "strong/high visibility spending growth," where companies such as Nvidia (NASDAQ:NVDA), Broadcom (NASDAQ:AVGO) and Marvell Technology (MRVL) are benefiting from cloud computing and artificial intelligence. Additionally, Arm Holdings (NASDAQ:ARM), Synopsys (SNPS) and Cadence Design Systems (CDNS) are benefiting from the increase in spending on chip design and chip design software.
Conversely, the firm sees downward revisions coming in the near-term for areas such as industrial and autos, as well as "headline risk" in semiconductor capital equipment, while any upside in semiconductors linked to smartphones and PCs should be faded, given that it is "largely seasonal."
As such, the firm lowered price targets on names such as Texas Instruments (TXN), Lattice Semiconductor (LSCC), Allegro MicroSystems (ALGM) and Wolfspeed (WOLF). It also highlighted ON Semiconductor (ON) and NXP Semiconductor (NXPI) for having high exposure to automotive.
"While content drivers (EVs, ADAS, factory automation, etc.) can propel long-term auto/industrial semis sales to 10%+ CAGR (from 5%-6%), we see near-term risks related to late cycle corrections (segment inventory 35 days above median)," the analysts wrote. 
Despite the mixed picture for the broader semiconductor industry, the firm raised its estimates on wafer fab equipment for 2023, 2024 and 2025 to $81.5B, $85B and $93B, thanks to "sustained" demand for trailing-edge nodes and shipments into China for dynamic random access memory. The firm's top pick amongst suppliers is Applied Materials (NASDAQ:AMAT), while it also likes Camtek (CAMT) due to its uniquness.

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