BofA Securities analyst Vivek Arya has identified Nvidia Corp. and Broadcom Inc. as prime investment opportunities to leverage the burgeoning artificial intelligence (AI) trend within the chip sector. However, Arya’s analysis extends beyond these two giants to highlight the potential of Marvell Technology Inc., Micron Technology Inc., and Advanced Micro Devices Inc. to carve out profitable niches in this rapidly evolving market landscape.
Marvell Technology Inc. emerges as a promising contender with compelling opportunities in electro-optics and application-specific integrated circuits (ASICs). Arya underscores the significance of Marvell’s upcoming analyst day scheduled for April 11, which could act as a potential catalyst for its stock. The event is expected to emphasize Marvell’s capability to capture a significant market share exceeding 10% for custom AI chips, along with its dominance in electro-optics products. These products are increasingly vital as AI cluster sizes expand, promising a strategic advantage for Marvell. Despite recent fluctuations in execution, Arya expresses confidence that Marvell’s legacy businesses may soon stabilize, highlighting its position as the second-largest player in AI networking, trailing only behind Broadcom.
Meanwhile, Micron Technology Inc. is positioned favorably to capitalize on the shift of AI applications toward the “edge,” where computing tasks are performed closer to end-users on their devices. Arya also notes the promising outlook for high-bandwidth memory products, which are witnessing robust demand outpacing supply, particularly for high-bandwidth memory critical to AI applications.
Regarding Advanced Micro Devices Inc. (AMD), Arya tempers some of the exuberance surrounding claims of the company commanding a 20% share of the AI accelerator market. Nevertheless, he remains optimistic about AMD’s prospects within the broader chip market, foreseeing it maintaining a 5-10% share in the AI accelerator segment. Despite facing competition from industry leader Nvidia and niche-focused startups, AMD’s solid performance and consistent execution bolster Arya’s confidence in its future prospects.
Overall, Arya assigns buy ratings to all three companies, referring to them as “junior samurAI” plays. However, he cautions that each company trades at a valuation premium compared to its respective leader, potentially resulting in greater stock volatility. Nonetheless, Arya’s analysis underscores the significant opportunities presented by the AI trend within the chip sector and the potential for these companies to capitalize on this rapidly expanding market.