Custom Semiconductors Winners
Potential Winners in Custom-Designed Semiconductors
J.P. Morgan has identified two chip stocks that are expected to thrive due to the growing demand for custom-designed semiconductors - Broadcom and Marvell Technology.
Market Growth Predictions
Analyst Harlan Sur predicts a 20% annual growth rate for the $14 billion high-end ASIC market, attributing this growth to the accelerated custom chip design activity, especially in generative AI applications.
Leading Beneficiaries
According to Sur, Broadcom and Marvell are primed to reap the rewards of this trend. He notes that both companies are poised to capitalize on the resurgence of custom chip design, with Broadcom currently holding the lion's share of the market at 35% and Marvell following as the second-largest player with 15%.
Market Performance
In Thursday's trading, Broadcom (AVGO) experienced a slight decrease of 1.7%, trading at $794.54, while Marvell Technology (MRVL) saw a 3.7% increase, reaching $60.65 per share.
Investment Outlook
Sur is optimistic about Marvell, giving it an Overweight rating and setting a price target of $70. He does not currently have a rating on Broadcom due to its involvement in advisory services with VMware.
Future Prospects
Sur highlights that Broadcom holds more than 80 ASIC chip design contracts, while Marvell boasts over 40 design wins in its pipeline. The analyst is buoyed by the outlook for both companies given their strong positions in the market.
Upcoming News
Investors are eagerly awaiting Broadcom's fiscal-second-quarter results, set to be announced after the market closes on Thursday.
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