It might be time to look for buying opportunities in a beaten-down part of the tech sector: semiconductor stocks. The VanEck Semiconductor exchange-traded fund (SMH) is down more than 4% over the past two years, while the broader S & P 500 tech sector is up 2% in that time. Chip stocks have been under pressure from supply chain disruptions sparked by the Covid-19 pandemic. Those supply chain pressures are now easing, however, as Covid restrictions around the world get rolled back — especially in China. This, along with the recent push toward artificial intelligence technology, has boosted chip stocks in early 2023. Year to date, the SMH is up 19.6%. SMH YTD mountain SMH in 2023 With this in mind, CNBC Pro set out to find the big winners in the space going forward. We screened the SMH for stocks that met the following criteria: Buy ratings from at least 55% of analysts covering them An average price target that implies upside of 10% or more Here are the eight stocks that made our list. Marvell Technology made the cut with more than 86% of analysts rating it a buy. The stock is up more than 19% this year, though it’s lost 34% over the past 12 months. JPMorgan analyst Harlan Sur noted earlier in February that the company is well positioned to capitalize from the increased interest in AI, as some of its chipsets are already being used by Google to power its artificial intelligence tech. The average analyst price target on the stock implies the most upside of any name on the list at 33%, FactSet data shows. Another stock that made the list is Analog Devices . Nearly 60% of analysts rate it a buy, and the average price target on the stock implies upside of 14% over the next 12 months. The company last week reported fiscal first-quarter earnings and revenue that beat analyst expectations. Analog Devices’ second-quarter guidance also beat expectations. “ADI continues to execute exceptionally well with revenue growth of 21% year-over-year and record earnings per share,” CEO Vincent Roche said in a statement. “Looking ahead, pervasive sensing, AI-driven edge computing, and ubiquitous connectivity are enabling new capabilities, applications, and markets at the Intelligent Edge.” Bank of America analyst Vivek Arya called the company a “best-in-class share gainer” on the back of those results. He also hiked his price target on Analog Devices to $230 per share from $215. The new target implies upside of 18.6% from Friday’s close. “ADI should be able to sustain profitability growth in an industry downturn. More importantly, with capital intensity peaking likely at 8%-9% and coming down over time, we see a path to 40%+ [free cash flow] margins, well above analog peer TXN (declining from mid-30s to mid-20s),” Arya said. ADI YTD mountain ADI in 2023 Advanced Micro Devices also made the cut, with nearly 60% of analysts rating it a buy and an average price target implying upside of 14.1%. The stock has rallied more than 21% year to date. However, the company warned late last month that it could suffer a 10% revenue drop in the first quarter . Still, most analysts have stuck with AMD, including Goldman Sachs’ Toshiya Hari. “We remain constructive on the stock given our expectation for significant market share expansion in server CPU and the potential for margin improvement in 2H23/2024,” Hari said in a note. The analyst reiterated his buy rating on AMD. Other names that made our list are Synopsys , Microchip Technology , Applied Materials , KLA and Broadcom .
These are Wall Street's favorite chip stocks, including one expected to rally more than 30%