Why AMD and Nvidia Look Like Buys Over Intel, Micron, WD, Seagate

Technology

Published: June 27, 2019 12:05 pm

Last Updated: January 30, 2020 7:10 pm

Not all technology companies have room to win in the future. That is effectively what Matthew Bryson of Wedbush Securities is telling the firm’s clients in a newly issued research report in the semiconductor and memory segment. Bryson just joined the Wedbush technology team as part of the firm’s recent acquisition of ABR Investment Strategy.

There are some deep and coming impacts on technology companies from the U.S.-China trade war. Some of the leading tech companies have tremendous upside, while others have tremendous risks and potential downside.

Wedbush started Advanced Micro Devices Inc. (NASDAQ: AMD) as Outperform with a $35 target price (versus a $28.86 prior close). AMD’s reemergence in central processing units and graphics processing units (GPUs) will benefit as the shifts in both the personal computer and datacenter markets shift over the next few years.

AMD’s early adoption of a distributed “chiplet” architecture combined with a shift to leading-edge geometries positions the company to take meaningful share from Intel in the core PC and server markets. AMD also is expected to realize some more modest benefits on the GPU side from its transition with sales and channels noted around TSMC, Google Stadia, console transitions and a recent deal signed with Samsung.

Shares of AMD were trading up 1.8% at $30.45 on Thursday, in a 52-week range of $14.74 to $34.30. AMD’s prior consensus target price from Refinitiv was $30.26.

Nvidia Corp. (NASDAQ: NVDA) was started as Outperform with a $184 target price (versus a $151.48 close). Bryson noted its prolific growth in 2017 and 2018 and a more recent sharp decline in its estimates and valuation. He is not forecasting a rapid recovery in crypto-mining equipment, but he does believe that inventories of gaming GPUs have largely normalized.

Webush’s $184 target implies north of 20% upside, with trends from artificial intelligence and machine learning, gaming, autonomous driving, high speed and intelligent network interface cards all offering support for growth ahead. Nvidia was trading up 1.6% at $161.79 and the consensus target price was $181.69.

Intel Corp. (NASDAQ: INTC) was started as Underperform with a $37.50 target price (versus a $46.85 close). Bryson believes that Intel’s recent struggles with execution, combined with cyclical downturns in key markets, create an uncertain future with downside risk to estimates.

Windows 7 support ends in January, and it is now expected that 2019 will mark the end of a corporate refresh cycle that has buoyed PC sales for years. The enterprise server and storage sales also clearly are ticking downward after a robust 2018, the memory market is in the midst of a sharp downcycle, and there are additional macro concerns, along with the U.S. government’s policy aimed at halting exports to Huawei.

Bryon believes that a sharp rebound in cloud and hyperscale spending in the second half of 2019 is unlikely. Intel shares were down 1.6% at $47.42, and the consensus target price was $52.31.

Wedbush was cautious about memory and drive-makers in its report.

Micron Technology Inc. (NASDAQ: MU), which just recently rose after handily beating lowered earnings expectations, was started as Neutral with a $30 target price (versus a $32.68 close). Micron was up another 1.7% to $37.63 on Thursday.

Seagate Technology PLC (NASDAQ: STX) was started as Neutral with a $35 target price (versus a $46.21 close), and it was trading down 1.1% at $46.71 on Thursday. Seagate has a consensus analyst target of $49.60.

Western Digital Corp. (NASDAQ: WDC) was started as Underperform with a $32.50 target price (versus a $41.10 close). Shares were up 2% at $44.47, and the consensus target price was $52.78.