European semiconductor equipment stocks are likely to outperform as spending on artificial intelligence chips rises over the next decade, according to Bank of America. The continent’s chip stocks produce the high-tech machines needed to manufacture the latest generation of chips. The Wall Street bank’s analysts predict strong demand for “AI accelerators” â chips sold by AMD and Nvidia â that will, in turn, drive up demand for the equipment needed to manufacture them. Nvidia has shown leading signs of that demand, with the company revealing tripled-digital quarter-on-quarter earnings growth in the past year. “We raise our [price targets] on our EU Semicaps coverage, which we expect to continue benefiting from investment in AI infrastructure,” BofA analysts led by Didier Scemama said in a note to clients on Feb. 9. “Given the scarcity of value in Europe for AI-related stocks, we believe the market will likely re-rate these names further.” ASML ASML , the dominant supplier of lithography equipment used to manufacture advanced logic and memory chips, remains Bank of America’s “top pick in EU Semicaps.” Analysts raised their price target for the Dutch company from 904 euros to 1,064 euros ($1,146), giving it an upside potential of 26%, which they say is justified by its “critical role in the AI ecosystem.” This stock has already run up by nearly 25% this year. The bank forecasts strong demand from leading chipmakers using ASML ‘s extreme ultraviolet lithography machines required to produce next-generation AI accelerators and high bandwidth memory modules. ASM International Bank of America also upgraded Dutch chip equipment manufacturer ASM International , with analysts lifting their price target to 619 euros from 521 euros, driven by expectations of above-consensus sales growth. The investment bank said ASM ‘s exposure to new transistor architectures called “gate-all-around” appears to be critical for improving AI chip performance. The company’s “unique” Atomic Layer Deposition technology, which is expected to enable the next generation of sub-3 nanometer chips, means the stock “warrants” a higher valuation multiple, according to the bank. BE Semi For BE Semiconductor Industries, which supplies advanced tools to chip makers, Bank of America set a new 163 euro price target based on expectations that its unique “hybrid bonding” (HB) technology will be increasingly adopted. “We think a premium multiple is now warranted given its dominant share in hybrid bonding, a transformational chipmaking technology about to take-off,” the analysts noted. “We expect BESI to benefit from (A) HB adoption in server CPUs (AMD, Intel), AI accelerators (AMD, Intel) and HBM modules (Koreans and Micron) and (B) troughing cycle fundamentals in PCs and smartphones.”
Eugen Boglaru is an AI aficionado covering the fascinating and rapidly advancing field of Artificial Intelligence. From machine learning breakthroughs to ethical considerations, Eugen provides readers with a deep dive into the world of AI, demystifying complex concepts and exploring the transformative impact of intelligent technologies.