Nomura Instinet initiated coverage on Advanced Micro Devices (AMD) on April 3 with a “buy” rating and a target price of $33. Nomura analyst David Wong thinks that the semiconductor industry will improve over the long term and overcome near-term cyclical headwinds.
Wong has also initiated coverage on semiconductor stocks like Intel (INTC), NVIDIA (NVDA), and Xilinx (XLNX). Intel and Advanced Micro Devices are Nomura’s top picks. Nomura gave Intel a target price of $65. Nomura initiated coverage on NVIDIA and Xilinx with a target price of $147 and $115, respectively. NVIDIA and Xilinx had a “neutral” rating.
Chip sales to rise over the long term
According to Nomura, the semiconductor market is struggling and could continue to face a cyclical downturn in 2019, which might extend for another year. According to a report by the Semiconductor Industry Association, worldwide chip sales fell 5.7% year-over-year to $35.5 billion in January 2019 and 7.2% sequentially. Wong expects the chip sales to decline ~10% in 2019 due to weakness in the semiconductor industry.
Wong expects the semiconductor sector to improve over the long term. He expects annual sales growth of 7%–9% from 2020 to 2025. The semiconductor industry will likely gain due to investing in AI, 5G technologies, autonomous driving, and Internet-of-Things over the long term. Advanced Micro Devices is launching a new set of microprocessors and GPUs over the near term, which could boost its market share.