The technology sector has been a favorite among investors in recent months, and investment bank Goldman Sachs is no exception. In a recent note, their analysts identified several opportunities in the Asian tech hardware industry that are worth considering. These opportunities are centered around various factors such as cyclical recovery, artificial intelligence, and geopolitical conditions, including changes in the semiconductor supply chain.
One of the stocks that Goldman identified as a buy-rated name and a conviction list stock is South Korean chipmaker SK Hynix. According to the investment bank, SK Hynix is expected to be one of the key beneficiaries of the growth in AI servers. The company is well-positioned in the high-end DRAM segment, and Goldman believes that it will experience significant earnings growth this year. This growth is attributed to the continued increase in DRAM pricing and some production growth. Goldman Sachs has set a price target of 170,000 Korean won ($129) for SK Hynix, implying a potential upside of around 27.3%.
Another stock that Goldman favors is Taiwan Semiconductor Manufacturing Company (TSMC). The investment bank views TSMC as having a leadership position in the industry and sees a long-term growth opportunity for the company. Despite a somewhat choppy near-term outlook, Goldman expects TSMC to achieve its revenue growth targets for the next several years, primarily driven by mid-to-high single-digit % silicon content growth and HPC demand. The bank has set a price target of 758 New Taiwan dollars ($24) for TSMC, suggesting a 29.8% upside potential.
Renesas Electronics: Attractive P/E Multiple
Goldman Sachs also likes Japanese semiconductor manufacturer Renesas Electronics. The bank’s analysts believe that Renesas’ low P/E multiple makes it more attractive than its peers. They consider Renesas to be well-positioned for share price growth when the cyclical recovery occurs. Goldman has set a price target of 3,300 Japanese Yen ($22.78) for Renesas, implying an upside of around 37.7%.
Foxconn Industrial Internet: Capturing AI Demand Growth
Foxconn Industrial Internet, the Shanghai-listed unit of Apple supplier Hon Hai, is another stock that Goldman includes in its conviction list. According to the investment bank, Foxconn has the potential to capture strong AI demand growth due to its broad exposure across the AI supply chain. In a separate note, Goldman highlighted that Foxconn’s revenue from its artificial intelligence arm is expected to grow from 2% in 2022 to 24% in 2025. The bank has set a target price of 29 Chinese yuan ($4.07) for Foxconn, suggesting a potential upside of around 124.6%.
Goldman Sachs’ analysts have identified several opportunities in the Asian tech hardware industry, focusing on factors like cyclical recovery, artificial intelligence, and geopolitical conditions. The stocks mentioned, including SK Hynix, TSMC, Renesas Electronics, and Foxconn Industrial Internet, have been selected as attractive investment options due to their unique positions within the industry. Investors looking to capitalize on the growth potential in this sector may consider these stocks as potential additions to their portfolios.
*Disclaimer: The information in this article is for informational purposes only and does not constitute investment advice. All investing involves risk, including the potential loss of principal.*
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