The stock market has had a great January so far, and the Nasdaq Composite (^IXIC) has led the way for bullish investors. That streak continued on Monday, as the Nasdaq led all other major market benchmarks with a 2% gain shortly before noon ET.
Investors like to hear what Wall Street’s professional stock traders have to say about their favorite companies, and often, a positive review from pro analysts can send stocks soaring. That was the case for Advanced Micro Devices (AMD 0.28%) and Nvidia (NVDA 0.30%) on Monday, as both semiconductor chip manufacturers earned favorable comments from influential analyst companies.
AMD keeps chipping away
Shares of Advanced Micro Devices climbed 8% in early afternoon trading on Monday. The semiconductor company got upbeat comments from multiple analysts.
Stock analysts at Barclays started things off, upgrading their rating on AMD from equal weight to overweight. They also boosted their share-price target on AMD stock, raising it from $70 per share previously to $85.
Overall, Barclays believes in companies that focus on semiconductor chips for use in data center equipment, PCs, and smartphones. Analysts there are hopeful that some negative macroeconomic factors that have hit some of those industries recently will reverse themselve soon, and Barclays sees conditions in China improving in the second half of 2023.
AMD also benefited from a price target increase from analysts at another company. Truist boosted its target on AMD stock by $9 per share, setting a new $79 figure.
Investors have been pleased lately at the way that AMD has answered the challenge and fought back to keep key advantages over longtime rival Intel. These Wall Street comments suggest that Advanced Micro Devices might be able to keep up that positive momentum throughout 2023 and potentially beyond.
Nvidia has higher targets on its back
Meanwhile, Nvidia shares were up 6% on Monday afternoon. The AMD rival also got favorable comments from multiple Wall Street analysts.
The same two analyst companies that looked favorably at AMD also boosted their price targets on Nvidia stock. Barclays gave the larger increase, sending its price target $80 per share higher to a new level of $250. Meanwhile, Truist gave Nvidia stock a $40-per-share target boost to $238.
Nvidia has seen a lot of success from its graphics processing unit chips, which have become the go-to standard for video game companies. Investors are hopeful that Nvidia will be able to roll out its newest upgraded graphics chips, although weakness in the cryptocurrency arena has put some pressure on potential sales that could force the chipmaker to cut prices.
What investors need to remember about both Nvidia and AMD, however, is that the chip industry has been notoriously cyclical in the past. Periods of strong demand have led to massive profits for chipmakers, who then typically move to increase capacity to take advantage of favorable industry conditions. That typically leads to gluts of chips, which in turn leads to price cuts and weaker profits for semiconductor stocks.
Unlike many commodity chip manufacturers, however, Nvidia and AMD have worked hard to build up proprietary prowess with specialty products. That’s a big part of why their share prices have soared over the years, despite the ups and downs of the broader industry.
Therefore, it’s not surprising to see Wall Street analysts applauding the efforts that AMD and Nvidia have made. With both stocks down sharply from their highs, investors are getting a relative bargain while still maintaining exposure to long-term growth trends in the industry.
Dan Caplinger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, and Nvidia. The Motley Fool recommends Barclays Plc and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short January 2025 $45 puts on Intel. The Motley Fool has a disclosure policy.