According to Wells Fargo, several chip stocks are expected to have a prosperous year as a result of the increasing demand for artificial intelligence (AI) semiconductors. Analyst Aaron Rakers from Wells Fargo has reiterated his positive ratings for Nvidia, Micron, Arm Holdings, and Synopsys.
Rakers reaffirmed his price targets for these companies, with Nvidia at $675, Micron at $95, and Synopsys at $630. Additionally, he raised his forecast for Arm to $85 from $70.
In a note to investors, Rakers expressed optimism about the fundamental semi setup in 2024/2025, emphasizing the secular expansion of Gen AI. He particularly highlighted the growing demand for AI servers, which he expects will contribute to sales growth of more than 30% this year.
During Wednesday’s trading session, the stocks of Nvidia and Micron experienced a slight decline of 1% and 0.5%, respectively. Arm Holdings and Synopsus also dropped by 2.3% and 1.3%, settling at $67.36 and $492.70.
Rakers believes that Nvidia possesses strong technological leadership in the AI field due to its data-center graphics processing units. He also notes that the company’s ability to offer comprehensive AI systems spanning software, hardware, and networking provides a significant competitive advantage.
Micron is gaining Rakers’ confidence in its ability to generate substantial revenue from its advanced HBM3E memory chips that will be used in advanced AI servers. As a leader in dynamic random-access memory and flash memory manufacturing, Micron is well-positioned to capitalize on the growing demand.
Rakers considers Synopsys and Arm to be core long-term holdings due to their involvement in electronic design automation software and other intellectual property related to chip design. He emphasizes the positive outlook for the EDA/IP market, which is experiencing influential secular tailwinds within the semiconductor industry.
In conclusion, chip stocks such as Nvidia, Micron, Arm Holdings, and Synopsys are poised for success, driven by the surging demand for AI semiconductors.