Bank of America analysts predict a possible rebound in semiconductor stocks amid recent turmoil within the sector.
Investor uncertainty and increased volatility have been a major impact on the sector due to fluctuating investments in AI infrastructure.
Recently, the semiconductor stock market has seen a significant decline as investors struggled to determine long-term ROI from AI.
AI is still in the developmental stage, and different opinions about its potential growth have led to instability within this sector.
Investors can take advantage of this volatility to purchase shares at lower prices.
Continued volatility in October
Vivek Ariya and other BofA analyst predict that the volatility in semiconductor industry will continue over the next several months.
History has shown that September is a difficult month for stocks in the semiconductor sector. The industry already experienced significant losses as it approaches this time.
Arya says that volatility could continue through NVDA’s earnings, and into September, which is historically the month with the lowest SOX prices, falling 70% of the time.
Market fluctuations have been aggravated by political and geopolitical uncertainty.
While the election uncertainty has diminished since President Biden dropped out of the race, tensions in geopolitics, especially those that involve Iran, are still high.
Arya argues that the semiconductor industry is only just beginning its recovery cycle despite all of these obstacles.
The current trend has only lasted four quarters. Previous upcycling cycles lasted ten to twelve quarters.
The Philadelphia Semiconductor Index is up 28% during this current trend.
The current bull market may not be half-way through, given that prior upcycles delivered an average return of 67%.
The recent drop in the price of semiconductors could be a good opportunity to buy.
Nvidia is the best investment option
Nvidia remains a top choice for semiconductor investment despite a 122% rise in stock prices this year.
The recent stock volatility can be attributed in part to the delays of Nvidia’s Blackwell GPUs. This highly anticipated product was a major industry player.
Nvidia’s dominance in the market is likely to reduce any impact these delays may have on long-term performance.
Analysts are optimistic about Nvidia.
UBS analyst Timothy Arcuri has a Buy rating and a $150 price target on the stock.
He downplays Nvidia’s position on the market by pointing out that the GPU delays will have a minimal impact.
Arcuri states that Blackwell’s lead customers should have the first Blackwell instance available to them by April 2025.
Nvidia’s outlook is also boosted by the increasing demand for AI from AI laboratories and enterprise.
Arcuri revises his earlier predictions and suggests that Nvidia earnings will likely increase into 2026 rather than reaching a peak in 2025, as was previously predicted.
The positive attitude towards Nvidia may help to stabilize the semiconductor industry and could set up a possible market recovery heading into October.
The semiconductor industry is still volatile, but the strong performances of Nvidia and other key players in the sector offer some hope that the market will turn around within the next few months.
The reasons for the BofA’s forecast of semiconductor stock rebound may change as new information becomes available.
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