AI chips reign while auto, industrial semis face headwinds: Susquehanna
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Nvidia (NASDAQ:NVDA), and other chipmakers with an artificial intelligence focus continue to thrive, while semiconductor stocks with heavy auto/industrial exposure face headwinds, according to Susquehanna’s third quarter semis earnings preview.
Automotive and industrial momentum began slowing during late summer.
“For Industrial, while Analog Devices (NASDAQ:ADI) and Texas Instruments (NASDAQ:TXN) were among the first to confess to the down cycle, recent softness suggests weakness continues to persist,” said Susquehanna analysts, led by Chris Rolland, in an extensive investor note on Monday.
The automotive outlook for semis continues to underwhelm as well, as multiple automobile manufactures have pointed out elevated inventory, weak demand and lower-than-anticipated electric vehicle adoption.
However, AI-focused semis appear to be in good shape, as Susquehanna expects hyperscaler and data center capital expenditures continue to climb.
“That said, the bar has been raised for most AI stocks as prior AI guidance will likely need to be raised to support stock prices,” Rolland said.
This includes Nvidia, Advanced Micro Devices (NASDAQ:AMD), Broadcom (NASDAQ:AVGO) and Marvell Technology (NASDAQ:MRVL).
Susquehanna expects PC notebook builds to increase by only 2.7% year over year in 2024, as AI PCs proved not to drive demand as much as many had expected.
As a result, Susquehanna reduced price targets for several sector stocks:
- Microchip Technology (NASDAQ:MCHP) to $95 from $105.
- Qualcomm (NASDAQ:QCOM) to $230 from $250.
- Skyworks Solutions (NASDAQ:SWKS) to $110 from $125.
- Ambarella (NASDAQ:AMBA) to $70 from $80.
- Cirrus Logic (NASDAQ:CRUS) to $160 from $175.
- Qorvo (NASDAQ:QRVO) to $115 from $135.
- Synaptics (NASDAQ:SYNA) to $95 from $110.
- Texas Instruments to $240 from $250.
- STMicroelectronics (STM) to $35 from $45.
However, Susquehanna increased price targets on a couple of semi stocks:
Overall, Street expectations for third quarter semis are up 5.3% quarter over quarter. Historically, this quarter is up 5.9%, Susquehanna finds. Looking ahead to the fourth quarter, expectations are up 5.4% quarter over quarter compared to the historical jump of 2.2% for semis.