We will also deal with similar topics at our Portfolio Investment Day 2024 conference on May 16, in which participation is free after registration.
The former star securities, the “fantastic seven”, are nowadays characterized by hectic trading, today, for example, the shares of Meta hit the floor after the company’s quarterly quick report, as investors fear that the social media giant will start spending again after the rationalizations. Tesla and Apple are suffering, Nvidia, whose price was close to $1,000 a month ago, has since lost more than 10 percent of its value.
The mood surrounding the sector was worsened by several factors, for example stagflation risk, rising interest rates, geopolitical tensions, AI story fatigue, weaker near-term outlooks from industry barometers such as Taiwan’s TSMC or ASML. In addition, demand trends are not favorable for products that represent the main market, such as telephones, personal computers, or cars.
But there’s no need to worry, according to Bank of America’s equity strategist, it’s “usual” in the semiconductor market to see a wave of selling in April, partly amid concerns over corporate earnings reports, the situation is usually better in May, so much so that the US index, which follows the semiconductor sector, typically has the second best month of the year. Meanwhile, Nvidia shares are now trading at favorable valuation levels.
Cyclical factors will also have a positive effect, inventory levels will normalize and sales may increase until mid-2026.
This is typically an upward cycle lasting 10 quarters, of which we are currently in the third quarter, according to the Bank of America analyst. He adds that fears about the car market and the industrial sector should also ease, as long-term demand for cars could increase thanks to the spread of electric cars.
Among individual stocks, Bank of America is a favorite NXP Semiconductors from the semiconductor sector, with a price target of $300, after the company’s stock trades on a low 2025 forward P/E ratio of just 14x.
Semiconductor components are a KLA Corporations the analyst’s top pick, which is justified by the high profit margin and less cyclical revenues, but it is Applied Materials is also among the favorites, although the analyst adds that there are regulatory risks as a result of investigations into Chinese shipments.
And from the data center segment it is Nvidia favorite of Bank of America with a target price of $1,100.
Cover image source: Getty Images
