JP Morgan believes that two chip stocks could do well even as the growth outlook for the cloud market weakens.
On Wednesday, semiconductor analyst Harlan Sur told investors that the weaker economic environment is likely to impact technology spending from cloud computing vendors next year. Sur noted that his company’s hardware team recently cut its 2023 growth forecast for cloud data center investments from 14% to 10%.
“The negative revision reflects the slowing global macro environment,” he wrote in a research report. “But we continue to believe that cloud infrastructure (particularly cloud networks/ASIC) focused vendors like
) must remain resilient given the leverage for strategic spending initiatives.” ASICs are application-specific integrated circuits, specially tailored chips.
Hur said that while the overall cloud market may be sluggish, he still expects specific areas to grow much faster, including data center switches and data center optical equipment. Therefore, he believes Marvell will do well with its cloud switching products next year, while Broadcom should benefit from strong demand for its switches and cloud data center ASIC chips.
“Marvell and Broadcom are well positioned to outgrow the general semiconductor industry market,” he wrote.
Sur has an Overweight rating for Marvell stocks with a price target of $85. He currently has no rating on Broadcom; he dropped cover after it was announced in May that JP Morgan is acting as financial advisor for
(VMW) in connection with the sale to Broadcom.
Broadcom shares are up 1% to $493.66 on Wednesday, while Marvel shares are up 3.6% to $46.90.
Write to Tae Kim on [email protected]