Semiconductor stocks got a lift from the rising tide of artificial intelligence. The PHLX Semiconductor Sector index surged 65% in 2023, well outpacing the S & P 500. This year it’s up nearly 20%. The divergence between semiconductor stocks that are doing well and those that aren’t is becoming starker, UBS said. It’s “increasingly hard to place all semiconductor stocks in one single bucket,” UBS said in a March 5 note. “The performance divergence between semiconductor stocks has been strong [year-to-date] and warrants attention,” it added. UBS said while one group of stocks has “significantly” outperformed — artificial intelligence-related semiconductor stocks and semiconductor capital equipment stocks (excluding China) — another group has “materially trailed” — analog and microcontroller semiconductor companies. Analog chips are usually used for power management and also as sensors, while microcontrollers are processors that are usually found in robots and medical devices, among other things. Despite the disparity, UBS says it’s forecasting a “solid recovery” in semiconductor revenues, predicting they will rise 28% year on year to $674 billion overall by the end of 2024. It forecasts semiconductor earnings per share growth to have a “sharp rebound” to the tune of 72% year on year by end-2024. It says one key driver will be a rise in demand for memory chips, as well as Nvidia’s contribution. UBS says it prefers these sub-sectors: memory chips, leading edge foundry, and analog and microcontroller semiconductors. Here’s its list of most and least preferred names.
Source Agencies
