Truist analyst William Stein warned against the sustained semiconductor rally due to a sudden negative shift in demand signals from a wide swath of computer, consumer, and communications OEMs to at least some of their semi-suppliers.
The cuts mainly related to production in the second quarter, but demand throughout the year’s second half remained strong.
While a single-quarter adjustment or a temporary headwind was possible, he was concerned that “a combination of just enough demand destruction and just enough additional supply is leading to a traditional cyclical downturn.”
Consequently, Stein adjusted his price targets for several key semiconductor stocks, including Advanced Micro Devices Inc, Intel Corp, and NVIDIA Corp.
Nvidia remained a Buy for Stein, even though he lowered his price target to $298 from $347 (23.1 percent upside). While he is constructive on the stock and continues to rate it a Buy, he said near-term price effects could become more volatile.
Stein preferred NXP Semiconductors NV, Analog Devices Inc, and ON Semiconductor Corp, as they were more reliant on industrial and auto demand.
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