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Data Center Trends Are Positive For These Semiconductor Stocks

When it comes to data center spending on server chips, a rising tide is lifting all boats. Spending trends are positive for the rest of the year for major semiconductor stocks in the space, a Wall Street analyst says.




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Mizuho Securities analyst Vijay Rakesh on Sunday reiterated his buy ratings on semiconductor stocks AMD (AMD), Intel (INTC) and Nvidia (NVDA) based on upbeat data center trends. He said supply constraints are the biggest obstacle for data center chip sales in the near term.

“We see data center trends intact from strategic hyperscaler spending and recovering enterprise,” he said in a note to clients. “We believe strength will remain into 2022.”

He maintained his price targets on the three semiconductor stocks. His price target on AMD stock is 107. He has a price target of 72 on Intel stock and 710 on Nvidia stock.

Semiconductor Stocks: Server-Chip Makers Mixed Bag

In morning trading on the stock market today, AMD stock dipped 0.7%, near 90.25. It is near a buy point of 95.54 from a cup-with-handle base, according to IBD MarketSmith charts.

Meanwhile, Intel stock rose 0.5%, near 56.30. Intel stock has underperformed this year.

Nvidia stock advanced 1.9%, near 816.90, on Monday. It has risen above the 20%-to-25% profit-taking zone following its recent breakout, based on IBD trading guidelines. On May 28, it hit a buy point of 648.67 out of a cup base, MarketSmith charts show.

Intel Preserving Server-Chip Market Share

AMD’s latest server chips show improved hardware performance, but lack of availability due to supply constraints could slow any market share gains, Rakesh said.

Intel is defending its market share through “much better availability” of its Ice Lake server processors vs. rivals, he said.

At Nvidia, “demand continues to overwhelmingly outstrip supply,” Rakesh said. But Nvidia has no major competitors in graphics processors used for artificial intelligence applications, he said.

“A supply-constrained semiconductor environment should continue to benefit the leading chip suppliers (AMD, Intel and Nvidia) with potential upside from those that can best fulfill demand,” Rakesh said.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

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