Zacks Industry Outlook Highlights: NVIDIA, Intel, Facebook, Apple and Cisco
For Immediate Release
Chicago, IL – April 27, 2017 – Today, Zacks Equity Research discusses the Industry: Semiconductors, including NVIDIA (NASDAQ: NVDA – Free Report ), Intel (NASDAQ: INTC – Free Report ), Facebook (NASDAQ: FB – Free Report ), Apple (NASDAQ: AAPL – Free Report ) and Cisco (NASDAQ: CSCO – Free Report ).
Industry: Semiconductors
Link: https://www.zacks.com/commentary/111605/semiconductor-industry-outlook---april-2017
The semiconductor industry is made up of 15 sub-sectors (including 4 for semiconductor equipment) within the Technology sector, which is one of the 16 broad Zacks-categorized sectors.
Similar to the Technology sector, Zacks also breaks down each of the other sectors into groups such that there are a total of 265 sub-sectors or industries. These industries are then ranked based on the average rank of companies comprising the industry.
Therefore the Zacks Industry Rank is a very good indicator of investment opportunities within an industry at any given time. Moreover, because stocks in the same industry have certain common positive or negative factors affecting them, it has been observed that even companies with a neutral Zacks Rank when part of an industry with a “positive” outlook will perform better than similar ranked stocks in industries with “neutral” or “negative” outlooks.
For this purpose, Zacks methodology says that the outlook for industries positioned #88 or lower is 'Positive,' between #89 and #176 is 'Neutral' and #177 and higher is 'Negative.'
Earnings Trends at a Glance
One of the main factors driving the Zacks Rank for individual stocks is earnings results. Therefore, it makes sense to take a look at how those have been.
From the latest earnings trends report , we see that 14.5% of technology stocks have reported with results trailing the S&P 500. Overall, technology stocks’ earnings were up 14.2% from the year-ago quarter on flattish revenue (down 0.3%). Also, 66.7% beat earnings estimates and an equal percentage beat revenue expectations.
Major Drivers
This section can be divided into the current and emerging drivers. But before getting into that, it’s important to understand the backdrop. This includes a shrinking traditional market (mainly PCs) that still consumes the bulk of chips as well as several emerging categories that have extremely strong growth potential. This means that while the industry as a whole may appear sluggish, there are solid opportunities waiting to be picked.
Current Drivers
As far as current drivers are concerned, the most significant are cloud computing, big data and artificial intelligence that are increasing demand for servers and data centers exponentially. Intel and NVIDIA (NASDAQ:NVDA – Free Report ) are the strongest positioned here, with Intel’s strength mainly on the enterprise side and NVIDIA’s on the HPC side. Intel (NASDAQ: INTC – Free Report ) is trying to challenge NVIDIA but that is easier said than done.
HPC is where a lot of the innovation is going on and NVIDIA is set to pick up share of spending because of its lead in machine learning. But of course it won’t be alone here. Intel has plans to get in the game with the technology it acquired through Nervana Systems. Both companies are working on hybrid solutions because GPUs do a better job of processing the huge amounts of data to train a neural network while CPUs do a better job of applying that data to a given situation. Xilinx is another important player working with FPGAs on top of ARM-based chips.
Some disruption is afoot in the enterprise segment as well because of the work done by the Open Compute Project (OCP) that Facebook (NASDAQ: FB – Free Report ) founded and continues to feed. The social networking company generates huge volumes of data that it needs to store, manage and process as quickly and cost-efficiently as possible.
Others with similar interest like Apple (NASDAQ: AAPL – Free Report ), and differing interest like Intel and Cisco (NASDAQ: CSCO – Free Report ) are also part of the project. Facebook designs the chip that is then optimized by the OCP so it becomes something members can standardize on.
So far so good. But if the OCP is able to design chips that perform better or comparably with Intel chips, the chip maker’s cloud business can be hurt. This explains why Intel is part of the effort.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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