VECO - Nvidia should 'reinvigorate' AI trade Barclays says; firm cuts Skyworks Solutions

2023-07-20 08:08:50 ET

Ahead of quarterly earnings reports from semiconductor companies, investment firm Barclays said it's likely to be a "mixed" season, with just a few areas holding on. However, artificial intelligence is the one "bright spot" and Nvidia ( NASDAQ: NVDA ) could "reinvigorate" the halo trade.

Analyst Blayne Curtis said Nvidia ( NVDA ) is likely to have another "significant" beat and raise quarter and boost the AI trade.

"AI is set to be the main event through earnings with likely higher capex numbers from cloud service providers reinvigorating the halo trade ahead of another expected strong beat/raise from NVDA next month," Curtis wrote in an investor note.

Curtis raised his price target on Nvidia ( NVDA ) to $600 from $500 and now believes that the company could earn $20 or more per share.

Conversely, the compute market is likely to be worse given softness in the server and PC markets, which could negatively impact AMD ( NASDAQ: AMD ) and Intel ( NASDAQ: INTC ) on second-half weakness.

"We think investors may be ready to look through a softer outlook for AMD, but just don’t see a catalyst for INTC to work," Curtis added. "We see both the confirmation of increased AI spending from Hyperscaler earnings (MSFT, AMZN, GOOG, META) as well as NVDA earnings as catalysts for the AI trade."

The optical market is likely to be weaker with continued inventory digestion, but AI is also likely to be a focus, given the presence of Marvell Technology ( MRVL ).

Curtis raised his price target on Marvell Technology ( MRVL ) to $75 from $55.

For the wafer fab equipment market, Curtis said Camtek ( CAMT ) and Veeco Instruments ( VECO ) should see "tailwinds" from AI and a strong trailing edge.

Curtis raised his price target on Camtek ( CAMT ) and Veeco Instruments ( VECO ) to $40 and $25, up from $28 and $20, respectively.

The analog end markets, where Analog Devices ( ADI ) and Texas Instruments ( TXN ) are the dominant companies, are "mixed" with both companies pointing to company-specific issues.

Curtis downgraded Skyworks Solutions ( NASDAQ: SWKS ) to equal-weight from overweight, as he does not see any catalysts for the radio frequency market and the stock closes the valuation gap with Qorvo ( QRVO ).

Curtis added that the Apple ( AAPL ) content story ended up "flat" as it got a boost from WiFi 6E, but lost the 2.4GHZ to Murata. Additionally, there's not a lot to look forward as the Android market is still weak, which could also negatively impact Qualcomm ( QCOM ).

Skyworks Solutions ( SWKS ) shares fell 3% on the downgrade.

Analysts are largely bullish on Skyworks Solutions ( SWKS ). It has a BUY rating from Seeking Alpha authors , while Wall Street analysts rate it a BUY . Conversely, Seeking Alpha's quant system, which consistently beats the market, rates SWKS a HOLD .

More on semiconductors

• Skyworks: Unlock Value With This Cash Flow Machine
• Skyworks: Where Growth Meets Value
• Nvidia: A Journey Towards $380 Billion In Revenue With GPU, AI, And FSD

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