BofA analyst Vivek Arya believes chipmaker Nvidia Corp could benefit from growth in several areas.
Arya chose Nvidia as his top large-cap sector pick.
Nvidia and fellow semiconductor businesses Marvell Technology, Inc and Advanced Micro Devices, Inc, can all immensely benefit from the continued growth in cloud computing, among other factors, Arya said.
Arya also chose ON Semiconductor Corp as his top small- to mid-cap pick, saying the company would benefit from its automotive technology.
Previously semiconductor companies had fewer drivers than now, such as computers and smartphones.
However, presently, there are multiple end markets served by a consolidated set of chip vendors, delivering proprietary products and generating solid free cash flow margins.
Arya’s top picks serve end markets where he expects spending/content growth drivers to be most resilient, such as cloud computing/AI, high-end industrial, EV/advanced driver assist systems and rising chip complexity.
Semis look compelling on a relative basis vs. industrial/Infotech stocks in the S&P 500 index with catalysts like easing of China lockdowns could help re-energize investor interest back in the sector.
