NVDA, INTC, or AVGO: Which Semiconductor Stock is the Most Compelling Pick in 2023?
Semiconductor stocks, like several other tech stocks, have advanced year-to-date in 2023, as investors feel that inflation has peaked and Fed’s interest rate hikes could be less aggressive. Nonetheless, the demand for semiconductors continues to be weak in certain end markets like personal computing (PC) and smartphones. Some analysts believe that the demand backdrop will improve in the second half of the year. Bearing that in mind, we used
TipRanks’ Stock Comparison Tool to place Nvidia (
NASDAQ:NVDA
), Intel (
NASDAQ:INTC
), and Broadcom (
NASDAQ:AVGO
) against each other to pick the
chip stock that could fetch better returns.
Nvidia (NASDAQ:NVDA) Stock
Nvidia is the market leader in the graphic processing unit (GPU) space. The company’s GPUs have strong demand in various applications, including gaming, data centers, automotive,
artificial intelligence, and
crypto mining.
Nvidia’s revenue declined 17% in Q3 FY23 (ended October 30, 2022), while adjusted EPS fell 50%. The slump in the PC gaming market following the reopening of the economy, the crypto winter, and the COVID-19 resurgence severely hurt Nvidia’s GPU sales. However, the company experienced strong demand in data center and automotive end-markets.
Investors will get more clarity about short-term pressures when the company announces its Q4 FY23 results on February 22. Currently, analysts expect revenue to decline 21% to $6.0 billion and
adjusted EPS to fall 39% to $0.81.
What is NVDA's Target Price?
On Monday, Barclays analyst
Blayne Curtis boosted Nvidia’s price target to $250 from $170 and reiterated a Buy rating. Curtis, who now has a more positive view on the semiconductor group, stated, “It would have been nice if the group got as cheap as we have seen in other downturns, but we underestimated the amount of money that wanted to move into semis and we don’t see the group testing October lows.”
Curtis increased the price target for
NVDA stock due to robust opportunities in artificial intelligence (AI). He noted that Nvidia is still leading in the GPU and AI markets.
Overall, the Street has a Strong Buy consensus rating for Nvidia based on 22 Buys, five Holds, and one Sell. The average NVDA price target of $207.65 implies upside of 8.2%.
Shares have rallied 31% since the start of 2023.
Intel (NASDAQ:INTC)
Stock
Intel’s problems started way before the ongoing macro pressures. The company lost ground to peers like Advanced Micro Devices (
NASDAQ:AMD
) in recent years due lack of innovation and persistent delays in key launches.
Tough economic conditions have made matters worse for the chip maker. Intel’s
Q3 2022 revenue fell 20%, while adjusted EPS plunged 59%. To improve its profitability, the company is targeting cost reductions worth $3 billion in 2023. It aims to deliver annualized cost reductions and efficiency gains in the range of $8 billion to $10 billion by the end of 2025.
Intel is slated to announce its Q4 2022 results on January 26.
Analysts expect a steep fall of 81% in adjusted EPS to $0.21 and revenue to fall 26% to $14.5 billion.
Is Intel a Buy, Sell, or Hold?
Ahead of the Q4 results, Susquehanna analyst
Christopher Rolland reiterated a Sell rating on
Intel stock but raised the price target to $24 from $22. Rolland sees more downside for the company due to a slowdown in IT spending and continued share losses to AMD’s “more competitive” Genoa chips.
All in all, Wall Street is sidelined on
Intel stock, with a Hold consensus rating based on three Buys, 19 Holds, and eight Sells. With
INTC stock advancing 14.5% year-to-date, the average price target of $29.92 implies a possible downside of 1.2% from current levels.
Broadcom (NASDAQ:AVGO
) Stock
Broadcom develops an extensive range of semiconductor and infrastructure software solutions. Last month, the company reported
better-than-anticipated results for Q4 FY22 despite growing macro pressures.
Revenue grew 21% to $8.9 billion, fueled by strong demand from hyperscale, service providers, and enterprise customers.
Moreover, Q4 adjusted EPS jumped nearly 34% to $10.45. The company generated robust
free cash flow of $4.5 billion in Q4, up 29% year-over-year. Backed by solid results, Broadcom increased its quarterly
dividend per share by 12% to $4.60 for FY23.
Is AVGO Stock a Good Buy?
Recently, Mizuho Securities revealed its outlook for semiconductors for 2023. Mizuho analyst
Vijay Rakesh expects a rebound in key sectors in the second half of 2023, including gaming, data center, handsets, and continued recovery in wafer fab equipment. However, the analyst is cautious about broader analog and memory markets in the near term.
Rakesh highlighted Broadcom’s industry-leading gross margin of 75% and operating margin of 62%, as well as “solid” free cash flow of more than $18 billion. Rakesh concluded, “We believe AVGO will continue to benefit from its Networking, Storage and Broadband portfolio while higher margin Software comes more into focus now at 20%+ of revenue and potential VMWare acquisition on deck.”
In line with his bullish thesis, Rakesh reiterated a Buy rating for
AVGO stock, with a price target of $700.
Most analysts are bullish on
Broadcom stock, with a Strong Buy consensus rating based on 13 Buys and one Hold. At $660.75, the average price target suggests 13.6% upside potential.
Shares have advanced 4% this year.
Conclusion
Wall Street is bullish about Nvidia and Broadcom, while they have a neutral stance when it comes to Intel. Following the recent rally, analysts see higher upside potential in
Broadcom stock than Nvidia and Intel. Moreover,
Broadcom offers a forward dividend yield of 3.2%. As per TipRanks Score System, Broadcom scores a “Perfect 10”, implying it could outperform the broader market over the long term.
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