Nomura On Semiconductors: Analyst Eyes Data Center, PC Trends

Earnings season for semiconductor companies is for the most part over. The reports showed that data center trends are "still soft," while the PC market is "looking good," according to Nomura.

The Analyst

David Wong maintained a Buy rating on AMD's stock with an unchanged $37 price target;

a Buy rating on Intel's stock with an unchanged $65 price target;

and a Neutral rating on Nvidia's stock with an unchanged $147 price target.

Data Center Trends

Both Intel Corporation (NASDAQ: INTC) and Nvidia Corporation (NASDAQ: NVDA) showed "modest" quarter-over-quarter growth in their data center businesses at 2% and 3%, respectively, Wong said in a Monday note. (See his track record here.) 

Yet both Intel and Nvidia saw "substantial" year-over-year declines of 10% and 14%, respectively.

On the other hand, Advanced Micro Devices, Inc. (NASDAQ: AMD) is likely to show "strong" sequential growth in its data center business, the analyst said.

Growth is likely to come from its new Rome EPYC family, which will continue eating away data center processor share from rivals, he said. 

PC Trends

Intel's PC processor growth in each of the past four quarters outperformed the industry average at a time when the chip industry is showing year-over-year declines, Wong said.

AMD has been gaining share in the space, and its new 7nm Ryzen desktop processors could help drive desktop processor growth, the analyst said. 

New Growth Segments

Nvidia's July earnings report showed that is automotive revenue grew, but it was helped by recognition of revenues from a non-recurring engineering transaction that may have accounted for most of the sales increase, Wong said. 

Current expectations call for Nvidia's automotive revenue to fall in the third quarter and establish a new normalized continuing run rate, he said. 

Price Action

AMD shares were down 2.21% at $30.78 near the end of Tuesday's session; Nvidia shares were down 1.26% at $168.63; and Intel shares were down 1.04% at $46.74. 

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