3 Analyst Must-Own Stocks for the Cloud Data and Self-Driving Revolutions

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Lam Research

This company remains one of the top chip equipment picks across Wall Street. Lam Research Corp. (NASDAQ: LRCX) designs, manufactures, markets, refurbishes and services semiconductor processing equipment used in the fabrication of integrated circuits. The company offers plasma etch products that remove materials from the wafer to create the features and patterns of a device.

Many Wall Street analysts have highlighted the company and its peers as having a significant equipment opportunity from the NAND evolution as well. Lam Research also appears well positioned to gain share in the wafer fab equipment (WFE) market, driven by a strong focus on technology inflection spending over the next few years.

Despite so-so foundry and logic spending in 2015, many on Wall Street think that Lam Research also will continue to benefit from technology transitions such as FinFET, 3D NAND, multi patterning and advanced packaging in 2015 and beyond. Many analysts believe it is the “cleanest” semi cap story benefiting from cyclical tailwind, SAM expansion and share gains.

While some have protested the company’s acquisition of KLA-Tencor, top analysts across Wall Street feel the deal will go through, making Lam Research the biggest force to contend with in the semiconductor capital equipment space.

Shareholders receive a 1.3% dividend. RBC has a $105 price target for the stock, and the consensus target is $101.28. The stock closed Thursday at $94.63 per share.

NVIDIA

This top chip stock has reported strong earnings this year, and it busted through the roof second-quarter numbers earlier this month. NVIDIA Corp. (NASDAQ: NVDA) is one of the leaders when it comes to supplying graphics processing technology for the 3D graphics market, including desktop graphics processors and gaming consoles.

NVIDIA is also moving into visual computing chips for cars, mobile devices and supercomputers. The company has a technology partnership with electric car maker Tesla Motors. It has been able to use its ability to leverage past investments, with a more controlled spending structure ahead on unified, which enables strong cash flow that is allowing a focus on capital return, which is currently estimated to be $1 billion next year.

Top Wall Street analysts feel the stock is maturing to a platform company from a pure chip company, and they see the stock continuing to benefit from four secular trends: virtual reality, PC gaming, chips in the automobile industry and graphic processing units (GPUs) in the cloud.

The RBC team noted this in their report:

We held meetings with investors and Nvidia and came away incrementally more positive on the company’s long-term prospects. Important data points included: 1) NVIDIA believes a ~$200–300 virtual reality price point would help inflect game development and adoption;2) HMD units could see an inflection in growth exiting 2017; 3) the quality VR experience can be improved materially over the next several years, allowing average selling prices to be stable;4) NVIDIA reiterated its original 12-month target for an autonomous vehicle built with Drive PX (~8–9 months out from today); and 5) we remain positive on Data Center growth driven by GPU
sales

Investors are paid a 0.7% dividend. The $72 RBC price objective is well above the consensus target of $49.93. The stock closed Thursday at $63.15

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Three top technology companies with very bright futures. Given the pricey market, investors may want to buy partial positions here and see how the often volatile months of September and October play out.