Nvidia could remain a big earnings winner - along with these other chip stocks

By Emily Bary

Cantor Fitzgerald likes Micron and Broadcom - but also Marvell, which has struggled to see stock gains in the wake of its most recent earnings reports

Some of the semiconductor industry's biggest winners so far this year are expected to keep winning this earnings season.

At least, that's the view of Cantor Fitzgerald analyst C.J. Muse, who said that "AI-leveraged names are still the most attractive to own heading into earnings." He listed shares of Nvidia Corp. (NVDA), Broadcom Inc. (AVGO), Micron Technology Inc. (MU) and Marvell Technology Inc. (MRVL) as ways for investors to go "long" that trend.

"Despite some fears of a bubble (we love a healthy degree of skepticism),AI spending remains as robust as ever, and numbers for [Nvidia] are going to continue up and to the right," he wrote. "Investors are typically paid owning [Nvidia] into a product cycle, and this is the mother of all productcycles today."

The prospect of $5 a share in earnings power next calendar year feels "almost like a lay-up today," one reason why he sees shares as "EXTREMELY" attractive given their current valuation. For context, the FactSet consensus projects only $3.59 in adjusted earnings per share next calendar year, up from an estimated $2.59 for 2024.

Nvidia's stock gained 9.3% after the company's last earnings report, and it was up 16.4% in the session following the prior one.

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Shares of Nvidia have gained 155% so far this year, while Broadcom shares are up 51%. With the potential for "upside to AI revenue guidance, numbers moving higher for [fiscal 2024], and meaningful upside in the out-years, [Broadcom] is set up well for outperformance into earnings," Muse wrote.

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Muse likes Micron as well, pointing to the memory-chip company's ability to capitalize on the growing industry need for memory as the artificial-intelligence craze powers forward. More generally, though, "Micron should benefit as the memory and storage market recovers from the deep downturn over the past couple of years," according to Muse.

Micron shares are up 51% so far in 2024.

Relative to the other three names, Marvell hasn't seen the same magnitude of stock gains, with its shares up 28% on a year-to-date basis. And Marvell hasn't been a strong post-earnings performer in the recent past, logging double-digit percentage declines following each of its last two reports and somewhat smaller declines following the two prior reports.

Muse thinks that, were Marvell's management to give a "concrete update" on AI revenue expectations, the stock would react positively. Plus, the company's cyclical businesses appear to have hit a trough, which minimizes the rise of downside.

"So while a meaningful post-earnings trading inflection will be reliant on updates to AI upside, we see risk/reward as attractive into the print (finally)," he wrote.

See also: 20 value stocks with high dividend yields and expected room to raise payouts

-Emily Bary

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07-16-24 1158ET

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