MKM Partners: Keep An Eye On NVIDIA And AMD

We've heard a lot about Intel (NASDAQ:INTC) in the last few weeks, and very little of it is what you'd call good news. Intel has been rapidly losing ground to rival chipmakers for some time now, and the near-term future doesn't exactly look great for Intel either. However, there are two chipmakers in particular that have caught the attention of MKM Partners analysts, and for those who keep a weather eye on these two, there could be a buying opportunity afoot.

Backing Two Big Chipmakers

The word out of MKM Partners, via chief market technician JC O'Hara, is that Advanced Micro Devices (NASDAQ:AMD) and NVIDIA (NASDAQ:NVDA) are both prime targets for purchasing, despite the fact that the two have slipped in recent trading. NVIDIA is actually down 2% on the month, reports note, while AMD is down 0.5%. This is despite positive growth in the sector overall, as represented by the VanEck Vectors Semiconductor ETF (NYSE:SMH), which is up 4.5% on the month.

With AMD up 101% on the year so far, and NVIDIA up around 123.5%, it's clear that these two have proven themselves leaders in the sector already. With some recent downturns, that may indeed pose a buying opportunity for those who want to own a piece of the semiconductor market while it's on what amounts to an end-of-the-year sales event. O'Hara looks for the downward pressure on both companies to last somewhere between a few days and up to a few weeks, so keep an eye on the companies if you're looking for a buy-in point.

The Analysts Tend to Agree

O'Hara—and MKM Partners by extension—isn't exactly going out on a limb with this projection. AMD, for example—based on our latest research—is not only considered a “buy” right now, but has been considered such for the last six months. The consensus only gets stronger for AMD; six months ago, the company had one “sell” rating, 14 “hold” and 19 “buy.” Today, it's one “sell”, nine “hold” and 25 “buy.” The price target has likewise been climbing, and with a price target of $81 currently, actually represents a step down from its current level of $92.13 as of this writing.

Meanwhile, our latest research has a similar story to tell about NVIDIA. A “buy” for the last six months, its high-water mark actually came three months ago, when the company had three “sell” ratings, five “hold” and 29 “buy.” Today, it's just a little softer, with four “sell”, three “hold” and 28 “buy”. The price target for NVIDIA, though, is trending very close to its current pricing. Right now, it's at $545.25, which is a near-match for the current price of $524 as of this writing.

An Effective Buying Strategy?

There's no doubt here that MKM Partners has a worthwhile strategy presented here. These two companies are clearly leaders in the sector and have been for some time. We know that Intel has been losing ground to AMD for a long while now, to the point that one of its biggest investors, the hedge fund known as Third Point (NYSE:TPRE), took on a larger stake in the company and made some clear suggestions about ways to improve. In particular, Third Point suggested that Intel get out of chip manufacturing as much as possible, a move which was greeted with skepticism.

We know that AMD has made a lot of advances in the chip market of late, appealing to not only PC owners looking for a lower-cost alternative, but also to data centers and similar operations who want processing power on the comparatively cheap. Even now, AMD graphics cards are still selling at big premiums as the next generation of gaming comes hesitantly online. It's the same story for new NVIDIA graphics cards as well, as PC gamers are eager to keep their rigs in line with all the new developments in the field. Reports suggest that AMD's latest chip, the Ryzen 9 5900HX, has already been spotted in the field and delivering big power for mobile users.

With much of the world still focused on work-from-home applications—and pretty much anything else they can do from home as well—it's clear the demand for chips won't be falling any time soon. AMD and NVIDIA have already established themselves as leaders in the sector, and with some short-term price pressure, taking advantage of this brief sell-off may indeed be a good opportunity to get in. MKM Partners certainly seems to think so.

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