JPMorgan Chase shared their current favorite semiconductor stock in a report to clients Monday.
Harlan Sur, an analyst at JPMorgan Chase Chip Industry, selected two chip stocks worth investing in from all the relevant stocks he studied, one is AVGO and the other is Lam Research (LRCX).
"If the trade negotiations do not deteriorate, we believe that semiconductor industry stocks will continue to outperform the market, because there are already signs that China's industrial demand trend has reached the bottom, and the cycle of capital expenditure in cloud computing industry has begun to accelerate." Harlan Sur wrote in Monday's report.
Harlan Sur expects that the capital expenditure of cloud computing service providers will start to increase in the second half of 2019. He points out that the top seven companies in the cloud computing industry - Google, Amazon, Facebook, Microsoft, IBM, Tencent and Alibaba (BABA) - are expected to increase their capital expenditure on cloud computing devices by 15% this year.
Harlan Sur gave Bloom a better market rating with a target price of $325, a 17% increase over the current price. He is very optimistic about Botong's AI chip. Broadcom chips are expected to account for 15% more of the iPhone released this year, and the company's free cash flow is expected to grow by more than 20% this year. Broadcom has 25% sales exposure to the cloud computing industry.
Broadcom shares rose 1.0% to $279.34 on Monday.
JPMorgan Chase gave Lam Research a better rating than the big market, with a target price of $190, up 5% from its current share price.
"The principle of storage equipment expenditure and the expectation of improving the demand environment, we expect that the supply and demand fundamentals will improve later this year." Harlan Sur wrote in the report.
Lam Research's share price has limited downside risks, he said.
Lam Research shares rose 0.5% to $180.15 on Monday.