Following a strong showing in 2021, semiconductor companies remain on track for upside yet again in 2022 amid solid demand and lean channel inventories, according to an Oppenheimer analyst. 

Growth Stocks To Continue To Outperform? Growth stocks led in 2021, and this trend is likely to continue through the cycle, analyst Rick Schafer said. Data Center/Cloud, 5G and auto are the verticals that are poised for outsized multiyear structural growth, the analyst added.

Supply constraints, though curbing upside near term, should materially improve in the second half, the analyst said.

Following $145 billion in semiconductor capital expenditures in 2021, fab capacity, excluding memory, will likely increase by 9% in 2022, with the growth weighted toward the second-half, Schafer said.

Data Center and Cloud spend will likely be strong as hyperscalers roll out new AI workloads, the analyst said.

The analyst expects 5G Random Access Networks to accelerate, led by the U.S., along with Europe/Korea. Auto production is also expected to rebound, he added.

"Constraints are well understood and should ease through 2022 following capacity adds," Schafer said.

The analyst said he is bullish on the long-term outlook for the semiconductor industry.

Related Link: 9 Semiconductor Themes For 2022: Automotive Chip Shortage, Strong Cloud Demand, AI/ML Powering Metaverse And More

Oppenheimer's Top Semiconductor Picks: Oppenheimer named Nvidia Corporation (NASDAQ:NVDA), Monolithic Power Systems, Inc. (NASDAQ:MPWR), Marvell Technology, Inc. (NASDAQ:MRVL) and Broadcom Inc. (NASDAQ:AVGO) as its top picks.

These companies, the firm said, leverage content and share gains in cloud/5G/auto. They are expected to deliver sustained/profitable growth, Schafer said. 

Nvidia is expected to see several structural tailwinds, including gaming, datacenter/AI accelerators, and autonomous vehicles, driving sustained outsized top-line growth, the analyst said. 

Monolithic Power, according to the analyst, has an above-average EPS growth outlook, improving revenue mix away from consumer and toward industrial, communications and networking, improving margin profile, and expected improvements in cash/capital allocation over time, in addition to management's consistent record of execution.

Marvell is expanding in the high growth cloud/DC market and offers the best pure play 5G infrastructure portfolio in the industry, Schafer said. The company is also positioned for auto growth with multigig 2.5/5G/10G ethernet, he added.

For Broadcom, the combination of expanding earnings power over time, sticky/stable industrial/infrastructure exposure and defensible technology gives confidence in its business and financial model, the analyst said.

The Semiconductor Stock Rating: Oppenheimer has Outperform ratings on Nvidia, Monolithic Power, Marvell and Broadcom. The price targets for the shares of the companies are:

Nvidia: $350
Monolithic Power: $600
Marvell: $100
Broadcom: $720

The Semiconductor Price Action: At last check:

Nvidia shares were down 4.36% at $267.78.

Monolithic Power shares were slipping 2.66% to $436.98.

Marvel was moving down 5.69% to $80.10.

Broadcom shares were retreating 3.53% to $600.02.

Related Link: 8 Stock Picks To Play The 2022 Emerging Trends Shaping The Semiconductor Industry