Micron, Broadcom, and 3 More Chip Stocks to Buy on the Dip, According to J.P. Morgan -- Barrons.com

By Tae Kim

Volatility in the semiconductor sector can give opportunities for investors.

Chip stocks tumbled Tuesday after chip equipment maker ASML surprise investors with a disappointing outlook. The iShares Semiconductor exchange-traded fund closed down 5% that day.

J.P. Morgan remains bullish on the sector and predicts shares will rise going forward.

Sur said his top chip stock ideas are Broadcom, Marvell Technology, Micron Technology, Analog Devices, and Microchip Technology. He has an Overweight rating on the five stocks.

"We expect the market to move into a more synchronized cyclical recovery profile across the different end markets in the 1H of next year," analyst Harlan Sur wrote on Friday. "China stimulus could potentially fuel a better 2025 recovery."

For Broadcom and Marvel, the two companies should benefit from the buildout of artificial-intelligence infrastructure in data centers. AI requires high-speed networking capabilities, an area where the two companies excel.

"In custom AI ASICs [application-specific integrated circuits], we continue to see strong customer adoption/design win pipeline expansion from Broadcom and Marvell," he wrote.

Micron, meanwhile, is a leader in the markets for DRAM, or dynamic random-access memory, which is used in desktop computers and servers. It has also become a key supplier of HBM, or high-bandwidth memory, for artificial-intelligence servers, which bodes well for the company. Sur cited how Micron's HBM capacity is sold out through next year.

For auto and industrial sector chip suppliers Analog Devices and Microchip, Sur forecasts they will gain market share as the number of chips inside auto and industrial products keeps rising. The analyst also says "demand trends have bottomed" earlier this year for the overall industry economic environment.

In Friday trading, Broadcom shares fell 0.6% to $180.49, Marvell stock went up 0.4% to $80.20, and Micron stock dropped 1% to $110.93. Analog Devices stock was up 0.6% to $228.58, and Microchip stock rose by 1% to $77.34.

Write to Tae Kim at tae.kim@barrons.com

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October 18, 2024 13:37 ET (17:37 GMT)

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