BofA reiterates buy on Nvidia, Marvell, AMD, Broadcom, Credo even as cloud worries emerge

Oct. 03, 2022 7:52 AM ETNVIDIA Corporation (NVDA), MRVL, AMD, AVGOINTC, MU, CRDOBy: Chris Ciaccia, SA News Editor16 Comments

Microprocessors on a dark background

Andrei Berezovskii

Bank of America reiterated its buy ratings on semiconductor companies Nvidia (NASDAQ:NVDA), Marvell Technology (NASDAQ:MRVL), AMD (NASDAQ:AMD), Broadcom (NASDAQ:AVGO) and Credo Technology (CRDO) on Monday as the group is likely to still benefit from increased cloud computing spending, even though worries have started to emerge.

Analyst Vivek Arya updated his cloud spending forecast for 2023, saying he now expects it to rise 7.5%, a slowdown from 2022, but still up year-over-year. The analyst noted that macro turmoil has reduced the pace of growth, but cloud spending is still expected to reach $170B in 2022, up 20% from 2021 and 2023 should be even higher at $183B, which the analyst said would be "inline with last down cycles when capex decelerated."

"Near-term trends are volatile, but prior downturns eventually led to multiple years of 30%+ annual spending trends," Arya wrote in a note to clients, adding that several new product cycles are likely to help drive spending as well.

Nvidia (NVDA) is moving to 5 nm and its recently announced Hopper GPU and Grace CPU lines should perform well, with similar sentiment expressed for AMD (AMD) and its Genoa, Bergamo and Pensando products.

AMD's (AMD) Genoa and Bergamo server chips are expected to be priced between 10% and 15% higher than its current-generation Milan offering, while Nvidia's (NVDA) Hopper accelerators may also be priced higher than current offerings.

Broadcom's (AVGO) Tomahawk 5 switch, Marvell's (MRVL) continued expansion into the cloud, along with customer ASICs and Innovium and Credo's (CRDO) Active Electrical Cables are also expected to see strength.

Arya added that the aforementioned companies may also see continued share gains from Intel (INTC) in different end markets.

The analyst conceded that the firm "doesn't have perfect visibility into chip inventory at cloud customers" and there have been some companies, including Micron (MU), Nvidia (NVDA) and Intel (INTC) that have had "breathtaking" commentary around certain end-markets, but that has mostly been focused on consumer demand.

Nonetheless, there are still a few reasons to be bullish on cloud spending: cloud services demand is still expected to grow at more than 30% in 2023; a potential reopening in China could stimulate demand; pricing of advanced network and accelerator chips is likely to increase; continued expansion of total addressable markets.

Investment firm Susquehanna recently said Advanced Micro Devices (AMD) is continuing to gain in the PC market, albeit one that has continued to weaken.

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