Oppenheimer Bullish On Nvidia, Cautious On AMD, Intel

Semiconductor stocks have taken a hit in recent weeks on concerns that the U.S. trade war with China could exacerbate an already cyclically soft market. One Wall Street analyst met with management teams from top semiconductor companies this week and said there is a clear winner among the group.

The Analyst

Oppenheimer analyst Rick Schafer reiterated the following ratings and price targets for semiconductor stocks:

• NVIDIA Corporation NVDA, Outperform rating, $190 target.
• Advanced Micro Devices, Inc. AMD, Perform rating.
• Intel Corporation INTC, Perform rating.

The Thesis

For Nvidia, Schafer said the stock remains Oppenheimer’s top pick among large-cap growth stocks.

“The tone of the meeting was confident, highlighting NVDA's leading position in core DC AI, gaming and autonomous growth verticals,” Schafer said in a Thursday note. (See his track record here.) 

Nvidia's revenue has returned to growth following the clearance of excess cryptocurrency mining inventory, the analyst said. Data center growth has cooled, but management is projecting inference will be a $20-billion market by 2023, he said.

Nvidia’s autonomous vehicle opportunity could be worth roughly $5,000 per robotaxi, Schafer said. 

For Intel, Schafer said the company is bullish on Internet of Things opportunities, but the analyst said IoT remains a relatively small part of Intel’s business.

“At ~5% of sales, the group remains relatively small and an unlikely offset to headwinds in other areas of INTC's business, most notably growing share loss to AMD in PC and server CPU related to long-standing 10nm delays and CPU shortages." 

Investors can find better growth and capital allocation opportunities elsewhere for the time being, the analyst said. 

AMD investors are eagerly anticipating the imminent release of a series of new products, including the 7nm CPU Rome server chips, Ryzen PC chips and the new 7nm Vega GPU hardware.

AMD has made tremendous strides with its latest tech, and its share gains from Intel are real, Schafer said.

Unfortunately, with the stock up 74% in 2019 and trading at about 34 times calendar 2020 EPS estimates, the analyst said it’s tough to recommend the stock.

"We see a high bar for upside with significant share gains in PC/Server already baked in, and we remain sidelined for now." 

Price Action

The three stocks mentioned were trading as follows Thursday morning: 

• Nvidia was up 0.66%. 
• Intel was up 0.89%. 
• AMD was down 1.83%. 

Related Links:

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