Nvidia Corp (NASDAQ:NVDA) and peer chip stocks, including Advanced Micro Devices, Inc (NASDAQ:AMD) and Broadcom Inc (NASDAQ:AVGO), are trading lower Friday as the chip companies remain susceptible to potential sanctions on China regarding artificial intelligence chip exports.

The Biden administration could restrict Nvidia’s AI chip shipments with three-tier export rules favoring allies like Taiwan and barring Tier 3 nations like China.

The Chinese semiconductor equipment industry was estimated to reach $230 billion in 2024, according to Statista.

Also Read: Nvidia Teams Up with Dutch Government to Build Cutting-Edge AI Supercomputer Facility

Goldman Sachs analyst Toshiya Hari pointed out that the semiconductor and semiconductor capital equipment sectors offer significant potential for generating alpha in 2024, particularly among companies supporting the build-out of AI infrastructure.

Top Performers in AI Infrastructure

Several stocks in the sector have greatly outperformed the broader market, delivering strong returns:

Underperformers in Analog, MCU, and Power

In contrast, stocks in the Analog, MCU, and Power sectors have significantly underperformed, with notable declines in:

Weak Performance in Semiconductor Capital Equipment

Similarly, stocks in the Semiconductor Capital Equipment and Materials segments also lagged behind, including:

Hari noted Nvidia’s GPU as the industry standard, which is supported by the company’s large installed base, robust developer ecosystem, and presence in all major Clouds. Nvidia and its partners’ ability to innovate will help them preserve their moat.

Broadcom is favorably positioned alongside Nvidia, backed by continued growth in the AI Semiconductor business with a potential acceleration in Networking, a recovery in the cyclical parts of its Semiconductor portfolio, sustained revenue growth, and margin expansion in Software.

In 2025, although challenging supply-demand dynamics in conventional DRAM and NAND are likely to keep a lid on Street estimates and Micron’s valuation multiple in the near term, Hari expects share gains in HBM and enterprise SSD, together with a gradually improving supply-demand backdrop in conventional DRAM and NAND, to catalyze positive EPS revisions and, in turn, better relative stock price performance.

Hari expects Lam Research to outperform its immediate peers in 2025. In addition to a quarterly recovery in the overall Wafer Fab Equipment market, he expects idiosyncratic drivers such as the adoption of Gate-All-Around transistors in leading-edge Foundry/Logic and the resumption of technology transitions in 3D NAND to support revenue growth that exceeds the overall WFE market.  

Hari expects Teradyne to benefit from share gains in Compute SoC test, HBM test, recovery in Mobile SoC test and stabilization and /acceleration in Robotics revenue growth.

The analyst also upgraded NXP Semiconductors (NASDAQ:NXPI) from Neutral to Buy and downgraded AMD from Buy to Neutral.

The NXP upgrade reflects the analyst’s belief that the Automotive MCUs market will begin to price in a cyclical recovery in 2025. Additionally, NXP is taking sufficient strategic steps, mainly its growing focus on the Chinese OEMs, to gain a share in the Automotive semiconductor market over the medium to long run. There is ample potential for NXP’s gross and operating margins to expand on a cross-cycle basis.

The underperformance reflects weakness in PC and traditional end-demand and, more recently, slower-than-expected growth in Data Center GPUs.

Also Read:

• Japanese Chipmaker Rapidus Sets Sight on Broadcom to Emulate Taiwan Semiconductor’s Market Dominance

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