Nvidia, Lam Research, Applied Materials top semi picks as Citi tells investors where to 'hide'
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Nvidia (NASDAQ:NVDA), Lam Research (NASDAQ:LRCX) and Applied Materials (NASDAQ:AMAT) are Citi's top picks in the semiconductor space, as the investment firm told investors to "hide" in equipment makers and those tied to the cloud and data center.
Analyst Atif Malik noted that while most equipment makers see the wafer fab equipment market at $100B this year, Applied Materials (AMAT) lowered the "constrained [wafer fab equipment]" market to $90B due to supply shortages. Buy-side investors are expecting the market to be $95B in 2022 and $90B in 2023 because of a recession and slowing consumer demand, so the update is viewed as a "good reset."
Malik added that he believes "stocks are closer to the bottom" with regards to lower earnings estimates, as analysts go through year-over-year billings analysis and stress test their models.
For the cloud and data center, Nvidia (NVDA) and Marvell Technology (MRVL) are expected to show "resilient" demand, due to hyperscaler builds, as well as enterprise IT and CPU, GPU and networking product cycles.
Applied Materials (AMAT), Lam Research (LRCX) and Nvidia (NVDA) shares were all higher in premarket trading on Monday, led by Nvidia's 2% gain.
Last month, ARK Invest purchased 250,000 shares of Nvidia (NVDA) after having previously liquidated the asset manager's stake in the graphics chip giant in November 2021.