J.P. Morgan believes two chip stocks can do well even as growth prospects for the cloud market softens.
On Wednesday, semiconductor analyst Harlan Sur told investors the weaker economic environment will likely affect technology spending from cloud-computing vendors next year. Sur noted his firm’s hardware team has recently lowered its 2023 growth forecast for cloud datacenter capital spending to 10% from 14%.
“The negative revision reflects the slowing global macro environment,” he wrote in a research report. “But we continue to believe that cloud infrastructure (especially cloud networking/ASIC) focused suppliers like
) should remain resilient given the leverage to strategic spending initiatives.” ASICs are application-specific integrated circuits, specially made custom chips.
Hur said while the overall cloud market may be slow, he still expects specific areas to grow much faster—including datacenter switches and datacenter optical equipment. That’s why he thinks Marvell will thrive going into next year with its cloud-switching products, while Broadcom should benefit from strong demand for its switches and cloud datacenter ASIC chips.
“Marvell and Broadcom well-positioned to outgrow the overall semiconductor industry market,” he wrote.
Sur has an Overweight rating on Marvell stock with a $85 price target. He currently doesn’t have a rating on Broadcom; he dropped coverage after it was announced in May that J.P. Morgan is acting as a financial advisor to
Broadcom stock is up 1% to $493.66 on Wednesday, while Marvel stock has gained 3.6% to $46.90.
Write to Tae Kim at [email protected]