SUPERNEWS

Macro

UBS: Semiconductor Revenue to Soar 28% by 2024

UBS forecasts semiconductor sector's solid recovery with a 28% revenue increase to $674 billion by 2024, driven by AI demand.

By Bill Bullington

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3/14, 19:51 EDT
S&P 500
iShares 20+ Year Treasury Bond ETF
iShares 7-10 Year Treasury Bond ETF
KLA Corporation
Marvell Technology, Inc.
NVIDIA Corporation
ON Semiconductor Corporation
STMicroelectronics N.V.
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Key Takeaway

  • UBS forecasts a 28% year-on-year rise in semiconductor revenues to $674 billion by end-2024, with EPS growth rebounding sharply by 72%.
  • Prefers memory chips, leading edge foundry, and analog/microcontroller semiconductors; highlights Renesas Electronics with a 69.7% upside.
  • Lists Onsemi and KLA among least preferred names, with potential downsides of -3% and -13.3%, respectively.

Semiconductor Stocks Surge Amid AI Boom

The semiconductor sector has experienced a remarkable surge in 2023, with the PHLX Semiconductor Sector index climbing 65%, significantly outperforming the S&P 500's increase of nearly 20%. This growth has been primarily fueled by the rising tide of artificial intelligence (AI), highlighting the sector's pivotal role in powering the next wave of technological advancements. UBS analysts have noted a stark divergence within the sector, emphasizing that it's "increasingly hard to place all semiconductor stocks in one single bucket."

Divergence in Performance

According to a March 5 note from UBS, the performance divergence among semiconductor stocks has been pronounced year-to-date, warranting investor attention. Stocks related to artificial intelligence and semiconductor capital equipment (excluding China) have "significantly" outperformed. In contrast, companies focused on analog and microcontroller semiconductors have "materially trailed." Analog chips, crucial for power management and sensors, and microcontrollers, found in robots and medical devices, represent areas of underperformance within the broader sector's rally.

UBS Forecasts a Solid Recovery

Despite the disparities in performance, UBS forecasts a "solid recovery" in semiconductor revenues, projecting a 28% year-on-year increase to $674 billion by the end of 2024. This optimistic outlook is further supported by an anticipated "sharp rebound" in semiconductor earnings per share growth, expected to rise by 72% year-on-year by the end of 2024. Key drivers of this growth include increased demand for memory chips and significant contributions from industry leader Nvidia. UBS has expressed a preference for memory chips, leading-edge foundry, and analog and microcontroller semiconductors sub-sectors.

Investment Opportunities

UBS has identified several most and least preferred names within the semiconductor sector, offering investors guidance on where to find potential upside and where to exercise caution. Among the most preferred names are STMicroelectronics, with a price target suggesting a potential upside of 17.3%, Infineon with a 29% potential upside, and Marvell Technology, which could see a 15.6% increase. On the downside, UBS lists Onsemi, KLA, Powertech, and GigaDevice as stocks with potential downside ranging from -3% to -31.4%.

Street Views

  • UBS Analysts (Bullish on semiconductor sector):

    "The performance divergence between semiconductor stocks has been strong [year-to-date] and warrants attention... forecasting a 'solid recovery' in semiconductor revenues, predicting they will rise 28% year on year to $674 billion overall by the end of 2024."