Technology

Will Semiconductor Stocks Lead the Charge to Recovery?

Chris Lange

No industry has been safe from the market carnage due to the coronavirus pandemic. It’s uncertain if a bottom is in sight yet, but investors already are beginning to ask themselves which industries will be the first to recover.

Generally speaking, semiconductors and the technology sector act as a bellwether for the market. So it would be logical to think that these semiconductor stocks could lead the market higher once a bottom is found. Also, South Korea (a major hub for semiconductors) is seemingly past the worst part of the coronavirus outbreak there, in terms of its total coronavirus cases curve.

The Vaneck Vectors Semiconductor ETF (NYSEARCA: SMH) has sold off about 25% from its all-time high in February. The exchange-traded fund was up about 9% in Tuesday’s session.

Goldman Sachs analyst Toshiya Hari made a series of updates to his chip industry ratings Tuesday, upgrading Intel Corp. (NASDAQ: INTC) stock to Neutral from Sell and Xilinx Inc. (NASDAQ: XLNX) to Buy from Neutral. He also downgraded Texas Instruments Inc. (NASDAQ: TXN) stock to Sell from Neutral and removed Applied Materials Inc. (NASDAQ: AMAT) from Goldman’s conviction list while keeping a Buy rating on that stock.

On Intel, Hari said that “structural challenges remain” for the company but there are some potentially positive developments ahead, including strength in the high-end client CPU and server CPU markets due to the growing work-from-home trend.

On Xilinx, Hari argues that the stock’s “material underperformance” in recent months “should provide relative support in what is expected to be a time of heightened uncertainty,” along with some positive business trends.

For Texas Instruments, he worries that the company’s vertically integrated model will hurt its margins, and he also sees the possibility of share losses.

Here’s what a few other analysts had to say about semiconductor stocks:

Wedbush Securities maintained Advanced Micro Devices Inc. (NASDAQ: AMD) as Outperform with a $57 target price (versus a $41.64 prior close) and added it to the Best Ideas List.

Citigroup maintained its Buy rating on Applied Materials but cut its target price to $58 from $76 (versus a $40.17 close). Deutsche Bank maintained its Buy rating but lowered its target price from $75 to $65.

Intel was raised to Neutral from Sell but its target price was cut to $54 from $55 at Goldman Sachs. Intel previously closed up 8% at $49.58, with a $63.98 consensus target price.

KeyBanc Capital Markets maintained Micron Technology Inc. (NASDAQ: MU) as Overweight but cut its target price to $48 from $63 (versus a $38.25 close).

Wedbush maintained Nvidia Corp. (NASDAQ: NVDA) as Outperform with a $311 target price (versus a $212.69 close) and added it to the firm’s Best Ideas List. Needham raised its Hold rating to Buy, with a $270 target price.

Goldman Sachs upgraded Xilinx to Buy from Neutral but cut its target price to $92 from $100. Shares had closed at $72.00, with a $97.95 consensus target price.