Nvidia and Chip stocks rise as Micron sees inventory levels improving

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NVIDIA

and other chip makers were in the premarket Wednesday after

micron

said high customer inventories showed signs of improvement.

of Germany

Infineon

also gain on positive outlook as semiconductor companies sound bullish and investors are alert.

The Philadelphia Semiconductor Index is up 21% so far this year after plummeting in 2022. Nvidia (Ticker: NVDA) is the strongest performer in the index, up 81% this year amid excitement over its chips’ applications in artificial intelligence. However, its valuation of more than 150 times trailing 12-month earnings could put off those looking for value.

micron

(MU) is positioned as a recovery market after reporting that its sales fell more than 50% in the fiscal second quarter. Micron is trading at a price-to-earnings ratio of less than 11 times.

Micron’s shares rose 2.3% to $60.62 in premarket trading, with management arguing that its data center business has bottomed out as customer inventories dwindled, though PC and smartphone shipments are still struggling had.

Needham analysts raised their price target on the stock to $71 from $67, maintaining a buy rating on the stock, arguing that Micron should be near its earnings low.

“We believe it will take 6-9 months for a normalized supply-demand environment to materialize. Given the aggressive bid actions by Micron and competitors, we believe there is a possibility that the industry will return to shortages and elevated prices in late 2024,” wrote Needham analysts, led by Rajvindra Gill.

Analysts at Mizuho Securities also maintained a Buy rating on Micron and maintained a price target of $72, arguing that the valuation is near historic lows and the past quarter could mark the bottom for margins.

Not all analysts were bullish, with Piper Sandler’s analysts maintaining an underweight rating on Micron stock.

“We believe that while bit growth could continue to move higher, pricing will continue to be challenged significantly in the short-term,” analysts at Piper Sandler wrote.

Other chipmakers have also rated the prospects for the sector positively.

Infineon Technologies

(IFNNY) on Tuesday raised its forecast, citing robust demand in its core automotive and industrial segments. Its German shares rose 6.5% on Wednesday.

Infineon
‘S

Guidance could be a positive sign for

Allegro MicroSystems

(ALGM), which was the second-best performer in the Philadelphia Semiconductor Index this year, up 50%. Allegro manufactures magnetic sensors and power integrated circuits, primarily for the automotive market.

Write to Adam Clark at adam.clark@barrons.com