BMO starts chip stocks coverage: Here are its preferred picks

Investing.com -- BMO Capital Markets began coverage of the semiconductor and quantum computing sector with an upbeat outlook, voicing preference for AI-exposed names and analog chipmakers as they emerge from a post-COVID downturn.

AI bellwether Nvidia is BMO’s top large-cap pick, initiated with an Outperform rating and a $340 price target. Analyst Harsh Kumar said Nvidia’s AI systems are "fully booked for the next 12 months as demand exceeds supply," with its next-generation Vera Rubin NVL72 system ramping in the second half of the year. He called the stock’s 18x forward price-to-earnings multiple “a discount” given expected revenue growth of 84% and 50% in fiscal 2027 (FY27) and 2028.

Broadcom ranks second in BMO’s AI coverage, also rated Outperform with a $455 target, as Kuamr sees it as the "leading AI supplier in custom ASIC (XPU) and networking."

Micron was initiated at Outperform with a $1,300 target. Kumar highlights a memory market supercycle driven by strong HBM demand and tight supply. AMD, Marvell and Semtech round out the broker’s AI-exposed Outperform ratings, with price targets of $550, $250 and $155, respectively.

In analog, BMO initiated Analog Devices, Microchip and Impinj at Outperform, while MACOM was started at Market Perform. Analog Devices is BMO’s top-ranked analog name, with Kumar noting it is "positioned for the broader semi cycle upturn" given signs of improving demand, including a book-to-bill ratio above 1 and rising bookings. The analyst set a $430 price target on Analog Devices, $95 on Microchip and $220 on Impinj.

BMO’s memory outlook points to the DRAM and NAND market growing from $215 billion in 2025 to $780 billion this year, an increase of 263%. Kumar expects tight supply conditions to persist since "no significant capacity comes online until 2027."

In quantum computing, the firm initiated D-Wave at Outperform with a $35 target, saying the company is the "best fit for commercial success" given its presence in two leading quantum approaches. The broker remains on the sidelines on Skyworks, rated Market Perform with a $70 target, citing a lack of near-term catalysts, and said it will await the close of Skyworks’ Qorvo acquisition before revisiting its view.

Overall, Kumar said he sees AI in "the early innings," with capex growth expected to continue for years to support surging token demand, which the analyst estimates has grown more than 6,050% recently.

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