These AI chip stocks are "dirt cheap", Mizuho says

Investing.com -- Mizuho’s TMT specialist Jordan Klein believes semiconductor and memory stocks remain attractively valued following Micron's results, and advised investors to stay overweight the sector.

"MU and memory stocks are dirt cheap and the free cash flow will accelerate like no tomorrow," Klein wrote.

He said the key takeaway from Micron's update was that supply conditions are tight and will get tighter next year.

Klein added that he feels more confident in the durability and upside potential of memory stocks, semiconductor equipment makers, foundries and parts of the hardware sector such as servers.

Even so, he said the results were not a game-changer, with those already bullish on memory, chips and the AI theme likely remaining so, while skeptics are unlikely to be won over.

Klein noted that SK Hynix and Samsung both closed at their highs in Korea, which he called a good sign.

He said almost all chip stocks apart from Astera Labs are cheap relative to their growth potential, with positioning having fallen well below summer highs and fundamentals having strengthened.

Semiconductor equipment and analog chipmakers are the least-owned parts of the sector, Klein said, recommending adding equipment names in the near term and being selective in analog.

"Ignore the day-to-day noise," he concluded, describing the swings between chip and software stocks as driven by quantitative, passive and systematic fund flows.

Original Article

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