At the beginning of 2024, technology stocks, which surged last year, fell sharply, but Nvidia, the general leader leading the AI wave, remained unabated. Overnight, Nvidia's stock price hit another record high, and AMD surged more than 8%.
At the beginning of 2024, market expectations for the recovery of the global semiconductor market are high, and it has also become the consensus of the industry. Major industry analysts have also given optimistic predictions: recovery+optimism is the main theme of industry predictions.
UBS expects the biggest beneficiaries in 2024 to be the hardware chips and GPUs that AI relies on for training and operation. It is expected to bring tenfold revenue growth to these companies in the industry, which will surge from $15.8 billion to $165 billion. This indicates that companies such as Nvidia, AMD, and Intel will have huge room for growth in the future.
Institutions have raised market expectations one after another
According to the latest data from the World Semiconductor Trade Statistics Association (WSTS), although the global semiconductor market is expected to decline in 2023, the global semiconductor market growth forecast for 2024 is still being raised, driven by strong demand for AI chips. The year-on-year growth rate is expected to reach 13.1%, and the total scale will rise to a record US$588.36 billion.
Market research agency Gartner predicts that the global semiconductor industry's revenue is estimated to reach US$624 billion in 2024, an increase of 16.8% over the previous year.
Gartner estimates that after falling 38.8% in 2023, the global memory market will rebound 66.3% in 2024. Due to weak demand and falling prices due to oversupply, prices in the NAND industry will bottom out over the next 3 months to 6 months, and the overall situation of suppliers will improve.
Another analyst firm, IDC, has a more optimistic outlook on the semiconductor market in 2024 than Gartner. In its latest forecast, IDC raised the 2023 forecast from $518.8 billion to $526.5 billion, while the 2024 forecast was also raised from $625.9 billion to $632.8 billion. IDC said that from a demand perspective, the US market will remain resilient, while the Chinese market will begin to recover in the second half of 2024.
IDC's latest forecast suggests that the semiconductor market has bottomed out and that semiconductor growth will resume at an accelerated pace starting next year. According to its forecast, the global semiconductor market revenue will increase from $518.8 billion to $526.5 billion in 2023, and the revenue forecast for 2024 will also increase from $625.9 billion to $632.8 billion. By next year, global semiconductor revenue will grow 20.2% year over year.
Which chip stocks are worth watching in 2024?
Bank of America said that despite strong stock price performance in the semiconductor industry in 2023, it is still optimistic about the industry this year and predicts that this may be the beginning of an upward cycle.
Looking ahead to 2024, Zacks Investment Research said that after technology companies have the basic hardware of chips, they will continue to update AI models and continue to build AI applications, so further development of AI technology is expected to drive consumer hardware upgrades — such as switching to AI PCs and AI smartphones, as well as new AI-based software services, such as the big end-side AI model and software application end of new AI technology embedded in chatbots.
The reason behind the efficient operation of the large end-side AI model and AI software is based on the core technical process of AI inference, while the hardware foundation of the AI inference process is a central processor with the CPU as the core.
Therefore, the three established CPU giants Intel, AMD, and Qualcomm, which have been forgotten by the market for a long time, have recently returned to the spotlight of the capital market. The upward trend in stock prices since November last year is the best proof that global capital favors these companies. At one point, these three giants were even mistaken by some analysts that they would miss out on the global AI boom.
Morgan Stanley pointed out in the top ten investment strategy topics in 2024 that with major improvements in data processing, storage, and battery life in consumer edge devices, there will be more catalysts to catch up with the edge AI segment in 2024, and the development focus of the AI industry will also completely shift from “training” to “reasoning.”
So, looking ahead to 2024, which chip stocks are worthy of investors' attention?
Futu News has compiled companies with a market capitalization of > 20 billion US dollars in the Philadelphia Semiconductor Index that have been unanimously agreed by Wall Street analysts as “strong buys” for reference.
As last year's biggest bullish stock, Nvidia is certainly on Wall Street's list, and KeyBanc said Nvidia is still “the best investment choice in the field of generative artificial intelligence.” The bank stated,
Despite a sharp rise in stock prices in 2023, we expect the strong impetus of artificial intelligence to continue as the backlog of demand continues to grow and supply gradually increases. Nvidia's market dominance, mature ecosystem, and leadership in chip performance should enable it to benefit from strong generative AI requirements”
Under optimistic expectations of strong demand for AI chips, technology stock analyst Beth Kindig predicts that next year, MI300 chip shipments will reach 300,000 to 400,000 yuan, and Nvidia H100 will reach 1.5 million to 2 million yuan.
Wolfe listed Nvidia on its “Alpha List” based on confidence in the company's earnings over the next few quarters and its long-term opportunities in the field of artificial intelligence.
Bank of America said that due to Nvidia's dominance in the field of generative artificial intelligence, it has become the industry's go-to stock. This could generate an additional $100 billion in free cash flow over the next two years.
KeyBanc gave Nvidia a target price of $740 and Bank of America's target price of $700, which represents about 31% and 27% potential upside, respectively.
Furthermore, Wall Street is optimistic that demand from tech giants such as Microsoft, Google, and OpenAI may boost AMD's AI chip sales and raise the company's target price one after another.
Barclays analysts raised AMD's target share price from $120 to $200, and said AMD's AI chip sales could reach 4 billion US dollars this year and exceed 7 billion US dollars in 2025.
Coincidentally, KeyBanc, a well-known investment bank on Wall Street, raised AMD's target price to 195 US dollars, respectively. Susquehanna Financial raised AMD's price target to $170.
Additionally, analysts from UBS, Bank of America, Wolfe Research, KeyBanc, and Mizuho listed Micron as one of their top choices. Bank of America, KeyBanc, and Mizuho Bank are targeting Micron with a price target of $100, or a potential increase of about 20%.
Wolfe Research says Micron may benefit from a strong recovery in DRAM and NAND in 2025. (NAND is a type of non-volatile flash memory that stores data when not connected to a power source.)
Wolfe's bull market scenario assumes a 40% year-over-year increase in DRAM and a 50% year-over-year increase in NAND, thereby driving Micron's overall revenue to 42% year over year by 2025.
Cow friends,
Are you optimistic about the outlook for the semiconductor industry in 2024?
Which company is your favorite?
Welcome to leave your wonderful opinions in the comments area~
Editor/Somer