December 16, 2022 (Dow Jones)
By Tae Kim, Barron's On-line

"After a difficult year for chip stocks, Bernstein is telling investors to take advantage of the share price declines and buy three semiconductor companies that have the best product outlooks.

On Friday, analyst Stacy Rasgon recommended Advanced Micro Devices ($95, rated OP), Nvidia ($200, rated OP)., and Qualcomm ($140, rated OP). He believes expectations for the stocks are now low enough for investor sentiment to surprise on the upside next year. The analyst has Outperform ratings on the three chip makers.

"In the current environment we would be looking for names that have cut [financial forecasts], and where there is a strong secular story that can play off that bottom," he wrote. "AMD, Qualcomm and Nvidia come to mind."

The stocks were all trading lower in early trading Friday amid a general market decline. AMD fell 1.8% to $65.36; Nvidia dropped 2.3% to $165.70; and Qualcomm sank 1.9% to $114.42.

The analyst has a $95 stock price target for AMD and a $200 target for Nvidia. For Qualcomm, his target is $140.

Rasgon says AMD's server processors are likely to continue to take significant market share from Intel ($23, rated UP) next year. The chip maker's "structural story around datacenter remains strong," he wrote.

For Qualcomm, the analyst is optimistic that smartphone industry demand will begin to improve and the maker of mobile processors and 5G chips should benefit from robust orders from Samsung Electronics (005930.Korea) and Apple (AAPL).

Finally, he expects Nvidia should thrive on the back of new product launches. The "initial signs [are] positive in both gaming and datacenter, with strong initial uptake," Rasgon wrote."