Analysts Are Rooting for Advanced Micro Devices, Inc., NVIDIA Corporation and Micron Technology, Inc.

Top Semiconductor Stocks Are Grabbing Analysts' Attention; Here's Why


Advanced Micro Devices Beats Out Intel for Tesla AI Collaboration

Advanced Micro Devices, Inc. (NASDAQ:AMD) shares were on a nearly 5% rise yesterday following the news that the chip giant is partnering with Tesla to create a new artificial intelligence chip for the autonomous car arena.

This will mark the giant’s first footsteps in the self-driving market, as before now, “AMD has had zero play” here, cheers Rosenblatt analyst Hans Mosesmann. Tesla is king of the self-driving car market, which is exactly why rival Intel has gone to its wit’s end to try to gain CEO Elon Musk’s favor. “Tesla is viewed as a leader in all things autonomous and any architectural move from the company is not done willy-nilly. It is a double-slap in the face to Intel which has been courting Tesla to no end,” explains the analyst.

However, with AMD as “the only player in the world that can offer both x86 CPU and strong GPU IP and expertise,” it is clear Mosesmann believes Tesla made a smart choice in teaming up with this chip giant.

In reaction to the news that AMD is raring to take on the autonomous car sphere with the ultimate electric car giant, Mosesmann reiterates a Buy rating on the stock with a $22 price target, which represents a 60% increase from where the shares last closed. (To watch Mosesmann’s track record, click here)

The analyst anticipates, “The Tesla/AMD move has disruptive implications to the multi-billion self-driving market as Intel […] has spent enormous amounts to get into the space with limited success in our opinion.”

“The net/net here for AMD is that Tesla has confirmed AMD’s CPU and GPU roadmaps in a field that nobody was considering as viable; it says that AMD’s CPU/GPUs in PC and server markets are the real deal in terms of capturing and perhaps exceeding historical peak share in x86 of 25% (now low single digits),” contends Mosesmann, bullish on the massive potential revving ahead for the giant.

Cautious optimism circles this semiconductor player, as TipRanks analytics exhibit AMD as a Buy. Out of 19 analysts polled by TipRanks in the last 3 months, 8 are bullish on Advanced Micro Devices stock, 8 remain sidelined, and 3 are bearish on the stock. With a return potential of nearly 5%, the stock’s consensus target price stands at $14.38.

Nvidia Still Leads the Chip Board in AI/Self-Driving Market

How should NVIDIA Corporation (NASDAQ:NVDA) investors be taking the AMD/Tesla news, considering Tesla has had history with Nvidia first?

RBC Capital analyst Mitch Steves says to simply “ignore the noise,” as just because Tesla partners with AMD does not erase its business with Nvidia. In fact, the news until now Steves dismisses as “unsubstantiated” anyway; but even if true, whether AMD capture market share or not steal Nvidia’s prime spot as “market leader.”

As AI chips become increasingly valuable, the analyst finds that it make sense for players like Tesla to seek “some instances to dual source.” Even if Nvidia is “no longer the sole provider of chips,” Steves does not take this Tesla reveal to mean AMD has ousted AMD.

Just like in Data center, the analyst predicts AMD may win some market share, but more importantly, ” NVDA remains as the de-facto standard and market share leader.” Keep in mind, asserts Steves, Toyota is not the only company in Nvidia’s pocket, as the chip giant also has compelling alliances with the likes of Uber and Toyota. While AMD may still release a slew of other exciting news circling the Data Center, but as far as the analyst sees the bigger picture, Nvidia will reign as ruler of market share at the end of the day.

As such, the analyst maintains an Outperform rating on NVDA stock with a price target of $205, which represents a just under 12% increase from current levels. (To watch Steves’ track record, click here)

Steves opines: “Net Net: we view the announcement as a near-term concern that should not impact the story over the next several years. AMD will likely gain some share both in auto and DC but we believe Nvidia will remain as the market share leader.”

“We think Tesla will use Nvidia chips for the majority of the AI workloads, while some AMD chips will be develop[ed] for specific computing jobs. This would allow the company to vertically integrate the chips (keeping more IP in-house) and does not suggest that NVDA will lose content in the future. Overall, we think Nvidia remains as the primary workhorse/engine while AMD chips are used for specific applications to avoid giving Nvidia 100% of the AI content in self-driving vehicles,” surmises the analyst.

Most on Wall Street anchor a bullish perspective on the chip giant, much like Steves, as TipRanks analytics showcase NVDA as a Buy. Based on 25 analysts polled by TipRanks in the last 3 months, 15 rate a Buy on Nvidia stock, 7 maintain a Hold, while 3 issue a Sell on the stock. The 12-month average price target stands at $163.55, marking a nearly 12% downside from where the stock is currently trading.  

Micron to Ride Promising DRAM Trends Through Fiscal 2018

Micron Technology, Inc. (NASDAQ:MU) is gearing up to post its fourth fiscal quarter for 2017 Tuesday of next week and Wall Street analysts are quickly becoming more and more confident on this chip giant as the memory market upswing could bring exciting gains to Micron’s table.

MKM analyst Ruben Roy joins the bullish analyst party, reiterating a Buy rating on MU stock while boosting the price target from $40 to $45, which implies a 25% increase from where the shares last closed. (To watch Roy’s track record, click here)

In a confident earnings preview, Roy angles for “another strong report and outlook from Micron,” and likewise anticipates fiscal 2018 looks robust, with recent supply chain checks fueling his expectations for stellar DRAM trends flowing through the fourth quarter on impressive robust demand and better mobile demand.

“We believe that ASP expectations for NAND have been more conservative than DRAM and we believe that a stable pricing environment will yield modest upside to MU NAND revenue. […] Importantly, MU has been steadily improving its NAND gross margin, which existed fiscal Q3 at 41%.”

Roy highlights: “While investor expectations have increased, as reflected in MU’s share price outperformance since its May quarter earnings (MU +20% versus SOX +10%), MU shares continue to trade at a valuation that suggests skepticism relative to the longer-term sustainability of the current cycle. We believe that the continued favorable supply/demand environment will extend into 2018 and this, coupled with continued cost reduction catalysts specific to MU, should yield continued multiple expansion.”

For calendar 2018, the analyst expects Micron to hit $6.38 in EPS.

How does Roy’s bullish bet weigh in against the Street? It appears the analyst is not the only one enthusiastic on this chip giant’s prospects, with TipRanks analytics demonstrating MU as a Strong Buy. Out of 21 analysts polled by TipRanks in the last 3 months, 19 are bullish on Micron stock while 2 remain sidelined. With a return potential of nearly 22%, the stock’s consensus target price stands at $43.88.