Investment firm Raymond James believes there is still significantly more upside for a number of semiconductor stocks, including Nvidia (NVDA), AMD (AMD), Intel (INTC) and more.
The firm, which reinstated coverage on the sector this week, has an Outperform rating on AMD and Broadcom, a Market Perform rating on ARM (ARM), Astera Labs (ALAB), and Intel, and Strong Buy ratings on Marvell (MRVL) and Nvidia.
“The AI secular theme has taken the wheel, and the strategy of trading the cycle in semis has moved to the back seat,” analysts at the firm wrote in a note to clients. “Each of these companies is impressive in its own way. We are AI bulls yet acknowledge the rich valuations and risk, but these are high-quality compounders with long-term growth rates above their cost of capital. We are in the midst of an unprecedented structural shift in the technology landscape, and semiconductors are foundational elements.”
Regarding Nvidia, the analyst noted the company is the leader in AI and should be a “core holding” for investors. “Nvidia retains significant competitive moats with an extensive and mature software stack resulting from over a decade head start, a strong community supported by the leading developers, and its full-stack systems approach and platform cadence.”
For Marvell, the analysts acknowledged that the company faces more skepticism as the secondary custom silicon supplier. However, they believe it has the “right ingredients” with its application specific integrated circuit business and optics segment.
“Data center products account for ~75% of sales now, and we see it as a share gainer in the custom ASIC and data center optical DSP markets; management targets roughly 20% market share ($8B+) in data-center ASICs by 2028,” the analysts wrote.
Broadcom is seen gaining share in the AI world, given that hyperscalers may want customized alternatives to general purpose processors.
“Continued upward estimate revisions remain a key element of our thesis,” Raymond James analysts wrote. “Non-AI semis and software will constrain growth, but we expect improvement. We model only 50% content for TPU Ironwood. Margin and cash generation from software are not fully appreciated.”
AMD is seen as the company best positioned to compete with Nvidia in the GPU market, and the analysts are expecting “continued momentum” in accelerators and AI rack systems. “Shares have attracted a broader audience post the recently announced OpenAI award (6 GW over several years),” the analysts wrote.
“We model just 190K MI350 chips and 915K MI450 chips in FY27. AMD appears poised for continued server and PC share gains,” the analysts added. “The AI [total addressable market] is large enough to support multiple chip suppliers.”
ARM is focused more on moving towards the data center and other AI-linked opportunities, including building chips itself. “Within the last two years, data centers have neared 20% of sales, which has resulted in increased exposure to hyperscale operators,” Raymond James’ analysts wrote.
Asters Labs focuses on high-speed connectivity offerings, and is seen as the “dominant supplier” in the retimer market with its PCIe5 and 6 offerings.
“Tremendous growth in compute intensity has fueled the increased traffic managed by chips, boards, and racks,” the analysts wrote. “This in turn necessitates higher demand for the high-speed interconnects that are Astera’s core competency.”
Intel has seen an “impressive recovery” in the stock amid a series of events — investments from the U.S. government, Nvidia and SoftBank (OTCPK:SFTBY) — but the fundamentals need to catch up. “Shares are trading well above median historic ratios, and our sum-of-the-parts analysis suggests a fair value is near the current price,” the analysts wrote.