Angela Palumbo
Investors have been busy buying up chip stocks with exposure to generative artificial intelligence, but one Mizuho analyst sees near-term risk to this big boom in semiconductor-stock prices.
Mizuho analyst Jordan Klein wrote in a research note Thursday that he is “starting to actually get worried,” about the persistent gains of chip stocks, specifically citing Nvidia, Broadcom, and Marvel Technology.
“Stocks do not only go up, and this current investor mentality which feels nearing a frenzy to get more and more Semi exposure with sell-side targets going higher and higher starts to remind me of 1999 into early 2000 across Tech,” Klein wrote.
Nvidia stock has surged 290% in the last 12 months, and consistently continues to hit new highs. The gain may be warranted, though. The company reported fiscal 2024 revenue of $60.9 billion in February, a 126% increase from the prior year. Chief Financial Officer Colette Kress said on the earnings conference call that demand for upcoming chips “far exceeds” supply.
Shares of Broadcom have risen 124% over the last 12 months while Marvell stock has gained 102%, American depositary receipts of Taiwan Semiconductor Manufacturing have increased 66%, and Micron Technology has popped 77%.
Klein, however, fears that the continuing increase in chip shares “feels a bit unhealthy,” when other semi stocks rise in tandem with Nvidia “on no new fundamentals.” There’s also the concern that other tech stocks in the Magnificent Seven are actually down on the year.
“NVDA is the stock leading semis and tech,” Klein said. “If it breaks, what is going to hold equity markets up at the highs? Not Apple, not Tesla, and not Alphabet or even Meta Platforms.”
Not all analysts are as skeptical, though. Fellow Mizuho analyst Vijay Rakesh raised his price target on Nvidia stock to $1,000 from $850 on Thursday while maintaining a Buy rating.
“We see multiples continuing to expand in the face of the AI rally,” Rakesh had written. “No change to estimates but [we] see potential for outperformance given strong AI demand continues to outpace supply.”
Overall, Klein says he remains positive on the semi industry, and sees “year-end prices higher vs current levels.” But he’s mindful that there may be a period of profit-taking following Nvidia’s AI conference beginning on March 18.
Write to Angela Palumbo at angela.palumbo@dowjones.com