Broadcom, Marvell Set To Lead In 2025 As Semiconductor Sector Is 'At The Cusp Of A Semiconductor Up-Cycle,' Says Analyst

As the tech world navigates 2024, JPMorgan analyst Harlan Sur has one clear message for stock investors: semiconductors are back in the driver's seat.

After semiconductor fundamentals bottomed in 2023, the sector is poised for a cyclical upturn, with Broadcom Inc. (NASDAQ:AVGO) and Marvell Technology Inc. (NASDAQ:MRVL) leading the charge.

‘We're At The Cusp Of A Semiconductor Up-Cycle‘

Sur isn't mincing words when it comes to what he sees on the horizon. “At this point, we believe we are at the cusp of a semiconductor up-cycle (approximately four to six quarters of positive Y/Y growth),” the analyst said.

He predicts industry revenue will begin to show year-over-year growth by the end of 2024, a trend he expects to persist well into 2025.

Broadcom and Marvell are positioned to ride the next wave of semiconductor growth thanks to their “strong exposure to strategic infrastructure dynamics. ” These stocks are set to benefit from increasing demand for cloud infrastructure and custom ASIC chips—vital for cloud giants like Amazon and Google.

Broadcom, Marvell: Positioned For Cloud Domination

Broadcom has already flexed its muscles in the networking and wireless chip space, while Marvell has dug deep into custom chips for data centers and networking, giving it an edge in the growing AI market.

According to Sur, “Cloud AI [is] strong,” and both companies are primed to capitalize on that strength. Investors should keep their eyes on the cloud and AI tailwinds driving these two semiconductor giants forward.

Clearing The Deck: Excess Inventory Is History

Another key factor behind Sur’s optimism is the clearing out of excess semiconductor inventory across various markets. As he noted, “excess customer chip inventories across markets continue to improve,” which sets the stage for positive earnings revisions moving into 2025.

This is good news for Broadcom and Marvell. With inventory overhangs diminishing and demand in data centers surging, these companies could be looking at robust earnings growth next year. As Sur points out, semiconductor stocks have already proven their resilience, with the SOX index up 65% in 2023 compared to the S&P 500's 24% gain.

Read Also: Intel Vs. Micron Technology: Which Chipmaker Holds The Edge?

M&A Momentum To Keep Rolling

Sur also highlights a quieter but equally significant trend: consolidation in the semiconductor industry. With strong deal activity in 2024, he expects M&A to continue supporting stock valuations.

“We continue to see strong M&A activity,” Sur stated, noting that smaller companies could get snapped up by larger players looking to expand their scale and competitive edge.

The Final Chip: Sur's Top Picks

As 2024 enters its final months, Sur remains bullish on the semiconductor space, particularly for companies with strong exposure to AI and cloud infrastructure. Broadcom and Marvell sit at the top of his list, perfectly positioned to capitalize on the sector’s resurgence. For investors looking for growth, these stocks are ones to watch.

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