Nvidia and Advanced Micro Devices are strong buys to play A.I. trends, Raymond James says
Nvidia and Advanced Micro Devices are strong buys given their artificial intelligence leadership, according to Raymond James. Analyst Srini Pajjuri resumed coverage of the semiconductor stocks, saying the two companies will emerge as winners as enthusiasm ramps up for artificial intelligence and machine learning technologies. "Nvidia Corporation is the undisputed leader in AI/ML and arguably has the best autonomous driving solutions," Pajjuri wrote in a Wednesday note. Nvidia is up 55% in 2023 after losing half of its last year, but the analyst said that its current valuation is justified given the growing tailwinds around artificial intelligence. Pajjuri called AI/ML cloud service the "new growth vector." The analyst's $290 price target on the company implies 27% upside from Wednesday's close. Meanwhile, Advanced Micro Devices is an "underappreciated play on AI/ML," according to the analyst. "Near-term investors focus is on server share gains, which should continue through the year." The analyst's $100 price target suggests shares can advance another 27% from Wednesday's close. Raymond James said it expects the two firms will benefit from tailwinds lifting the broader semiconductor industry in the year ahead, such as the growth in AI technologies, broader electric vehicle adoption, as well as easing inflationary pressures. "While valuations look a bit stretched, we expect upward estimate revisions to start in 2H23 as inventories normalize, setting the stage for continued outperformance," the analyst wrote. —CNBC's Michael Bloom contributed to this report.