KeyBanc Lowers Chipmaker Estimates - Says Supply Chain Findings Mostly Negative
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The analyst reduced forecasts after its quarterly supply chain findings were mixed, but "mostly negative."
"Supply was clearly disrupted in 2Q by the China lockdowns, while demand across all consumer end markets (PC, smartphone, IoT) weakened further," the analyst wrote.
Nvidia's price target was lowered to $230, due to slowing gaming GPU demand as a result of macro inflationary concerns and a slowdown in crypto mining. The analyst believes those factors are likely to "result in another cut to forward estimates," as they believe Gaming could decline -20% q/q in 3Q. Vinh maintained an Overweight rating on the stock.
AMD's price target was lowered to $130 per share due to excess gaming GPU inventory, and slowing PC demand. However, KeyBanc remains Overweight on the stock as they still see secular growth.
"Despite a looming correction, we retain a constructive stance on the broad-based and analog semiconductor group given: 1) many of the stocks in our coverage are trading at or near trough valuations; 2) we foresee a softer landing scenario despite the renegotiation of NCNR terms—in contrast to prior corrections, backlog would immediately disappear, while negotiations provide chip companies with opportunities to better navigate a downturn; and 3) we see secular trends across 5G, electrification across auto industrials, cloud, and ML/AI being more resilient in a downturn vs. prior cycles, where many of these trends were much more nascent or nonexistent," wrote Vinh.
By Sam Boughedda
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