Look beyond Nvidia as these three AI-chip stocks win praise from BofA

By Emily Bary

Marvell, Micron and AMD dubbed 'junior samurAI' plays on artificial intelligence

Nvidia Corp. and Broadcom Inc. shares are BofA's leading ways to play the artificial-intelligence trend within the chip sector, but several other players could carve out a "profitable niche."

That's the view of BofA Securities analyst Vivek Arya, who called out the potential of Marvell Technology Inc. (MRVL), Micron Technology Inc. (MU) and Advanced Micro Devices Inc. (AMD) in a Sunday report.

Marvell has compelling opportunities in electro-optics and application-specific integrated circuits, or ASICs, according to Arya. The company's April 11 analyst day could prove a stock catalyst by emphasizing Marvell's potential to win more than 10% market share for custom AI chips and its dominance with electro-optics products that could become all the more important as AI cluster sizes balloon.

The company's execution admittedly "has been spotty the last few quarters," but Arya said Marvell's legacy businesses could trough in the near term. Meanwhile, the company is No. 2 in AI networking, behind Broadcom (AVGO).

See also: Broadcom's stock climbs as one bull calls it a 'world-class' AI play - for cheap

He also said he likes Micron, which he says could win out as AI applications move to the "edge," or onto people's devices. Plus, the trajectory for high-bandwidth memory products looks intriguing.

"Usually new memory demand cycles are met with a supply response, leading inevitably to inventory and price pressure," he wrote. "High-bandwidth memory (HBM), critical to AI, is perhaps the first memory technology that is rapidly eating into the supply," consuming three times the wafer amounts that traditional double-data-rate DRAM memory does.

On AMD, Arya noted that he isn't as bullish as some who think the company can command a 20% share of the AI accelerator market, but he still sees the chip market benefiting from a rising tide.

"AMD's sharp rise in the AI market and its well-regarded execution consistency keeps us confident it can continue to maintain a 5-10% share in AI accelerator market," he wrote. That's even as the company is "flanked on three sides" by Nvidia (NVDA), makers of custom chips and startups that target niche use cases.

Don't miss: AMD CEO Lisa Su earned nearly double what Intel CEO Pat Gelsinger did in 2023

Arya has buy ratings on all three of the names - which he dubbed "junior samurAI" plays - though he flagged that each one "trades interestingly at a valuation premium to its respective leader, so greater stock volatility is to be expected."

Read: Microsoft's AI advantage is so critical it can't be quantified, analyst says

-Emily Bary

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04-01-24 1043ET

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