Raymond James resumed coverage on semiconductor stocks on Thursday, with NVIDIA (NASDAQ: NVDA) and Advanced Micro Devices, Inc. (NASDAQ: AMD) at Strong Buy, Marvell Technology (NASDAQ: MRVL), Micron Technology (NASDAQ: MU), Qorvo (NASDAQ: QRVO), and Intel (NASDAQ: INTC) at Outperform, and Broadcom (NASDAQ: AVGO), Qualcomm (NASDAQ: QCOM), and Skyworks Solutions (NASDAQ: SWKS) at Market Perform.

In addition, Raymond James analyst Srini Pajjuri initiated coverage of Western Digital (NASDAQ: WDC) at Outperform.

"Nearly 85% of SOX index components saw an average 30% estimate cut during the past 6 months, suggesting the worst is now behind most semi
stocks," stated Pajjuri.

The year-to-date rally in SOX "makes sense," says Pajjuri, but also "raises questions about how much more outperformance is left."

"Easing inflationary pressures, China re-opening, and secular trends such as artificial intelligence (AI)/machine learning (ML), advanced driver assistance systems (ADAS), and electric vehicle (EV) adoption make us optimistic about a 2H recovery," the analyst added.

"While valuations look a bit stretched, we expect upward estimate revisions to start in 2H23 as inventories normalize, setting the stage for continued outperformance."

By Sam Boughedda