To The Moon

AMD, Qualcomm, Nvidia, Broadcom among Bernstein's top semi picks for 2023

$Semiconductor Bull 3X Shares(SOXL)$ 

Advanced Micro Devices $Advanced Micro Devices(AMD)$ , Nvidia $NVIDIA Corp(NVDA)$ , Qualcomm$Qualcomm(QCOM)$  and Broadcom $Broadcom(AVGO)$ are investment firm Bernstein's top picks in the semiconductor sector going into 2023, as the first three have seen their estimates cut "markedly" and Broadcom (AVGO) still has a record backlog.

Analyst Stacy Rasgon, who has an outperform rating on all four companies, noted that 2022 was an awful year for semiconductor stocks and 2023 is likely to see a downturn for the sector, though there are debates on how far it will go and how long it will last.

"In the current environment we would be looking for names that have cut, and where there is a strong secular story that can play off that bottom (AMD, QCOM, and NVDA come to mind, as well as, potentially, semicap), and would continue to pitch AVGO for the cyclically nervous," Rasgon wrote in a note to clients.

Rasgon noted that AMD (AMD), Qualcomm (QCOM) and Nvidia (NVDA) have already cut estimates, but all three companies have "good stories going forward," even if AMD (AMD) has some client risk, despite the fact it is taking market share away from Intel (INTC).

Nvidia (NVDA) has also likely seen a bottom in gaming and it has a number of product cycles going for it next year, including in datacenter and gaming. Qualcomm (QCOM) is likely to face easier comparisons and could see share gains from Samsung (OTCPK:SSNLF) and a "stickier" situation with Apple's (AAPL) modems, along with a "burgeoning adjacency story coupled to very inexpensive valuation."

For Broadcom (AVGO), Rasgon said it could benefit "cyclically nervous" investors given its visibility and the fact that its software segment is increasingly lowering its volatility (along with the potential for VMware (VMW) to lower it) and a strong cash generation and return profile.

Other semiconductor stocks that Rasgon has a favorable view on include Applied Materials (AMAT), Lam Research (LRCX) and Analog Devices (ADI).