## Semiconductors Are Back: JPMorgan Analyst Sees Strong Growth in Broadcom and Marvell
The tech world is buzzing with excitement as 2024 unfolds, and for stock investors, JPMorgan analyst Harlan Sur has a clear message: semiconductors are back in the driver’s seat. After a challenging 2023, the sector is poised for a significant cyclical upturn, and two companies are leading the charge: Broadcom Inc. (AVGO) and Marvell Technology Inc. (MRVL).
Sur is confident in his prediction of a semiconductor upcycle, stating, “At this point, we believe we are at the cusp of a semiconductor up-cycle (approximately four to six quarters of positive Y/Y growth).” He anticipates that industry revenue will show year-over-year growth by the end of 2024, a trend he expects to continue well into 2025.
Broadcom and Marvell: Positioned for Cloud Domination
Why are Broadcom and Marvell positioned to benefit from this growth? Sur points to their “strong exposure to strategic infrastructure dynamics.” Both companies are set to ride the wave of increasing demand for cloud infrastructure and custom ASIC chips, essential components for cloud giants like Amazon and Google.
Broadcom has already established its dominance in the networking and wireless chip space, while Marvell has made significant strides in custom chips for data centers and networking, giving it a competitive edge in the burgeoning AI market. Sur highlights the strength of “Cloud AI,” a key growth driver for both companies.
Clearing the Deck: Excess Inventory is History
Another crucial factor fueling Sur’s optimism is the decline of excess semiconductor inventory across various markets. As he notes, “excess customer chip inventories across markets continue to improve,” setting the stage for positive earnings revisions moving into 2025. This is good news for both Broadcom and Marvell.
With inventory overhangs decreasing and demand in data centers surging, these companies could be looking at robust earnings growth next year. The resilience of semiconductor stocks is already evident, with the SOX index soaring 65% in 2023, compared to the S&P 500’s 24% gain.
M&A Momentum to Keep Rolling
Sur also emphasizes a quieter but equally important trend: consolidation within the semiconductor industry. Strong deal activity in 2024 indicates that M&A will continue to support stock valuations. Sur states, “We continue to see strong M&A activity,” suggesting that smaller companies may be acquired by larger players looking to expand their scale and competitive edge.
The Final Chip: Sur’s Top Picks
As 2024 heads into its final months, Sur maintains his bullish outlook on the semiconductor space, particularly for companies with strong exposure to AI and cloud infrastructure. Broadcom and Marvell stand out as top picks, perfectly positioned to capitalize on the sector’s resurgence. For investors seeking growth, these stocks are worth close attention.
