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Investing.com -- Goldman Sachs sees broad fundamental upside across the semiconductor sector heading into first-quarter earnings, but with a selective view on which names may outperform and which could disappoint.
The bank sees fundamental upside across most sub-sectors of the chip ecosystem, arguing that a meaningful pullback in several top-performing stocks over the past few weeks has created a more favorable trading setup. Compute, memory, storage, and semiconductor capital equipment are among the areas where analysts see the strongest potential for estimate beats.
On the buy side, Teradyne stands out as Goldman’s highest-conviction call. "We see upside to Street for the quarter and guidance, given upside we see for tester demand across computing, optical, and memory - with potential disclosure around its opportunity to gain share in GPU testing," analysts led by James Schneider said in a note.
Applied Materials is also flagged for upside potential, with analysts pointing to capacity pull-ins in both DRAM and foundry as key drivers. With roughly 60% exposure to etch and deposition, Goldman sees room for the stock "to continue re-rating toward peer valuation levels."
Advanced Micro Devices rounds out the bullish calls, where server CPU strength tied to AI infrastructure spending is expected to drive a modest beat, even as PC weakness provides a partial offset.
On the downside, KLA Corp., despite what Goldman described as a "very constructive Investor Day," is expected to lag peers because current equipment spending is skewed toward DRAM, an area where inspection and metrology intensity tends to be lower.
Onsemi also faces what analysts call idiosyncratic headwinds from its heavy automotive exposure, compounded by pressures in its CMOS image sensor and silicon carbide businesses.
Arm Holdings, which carries a Sell rating, is expected to deliver an "in-line quarter given smartphone-related headwinds driving a near-term pullback," the analysts wrote.
More broadly, the bank sees hyperscaler capital expenditure trends tilting upward, which it expects to support both server CPU demand and ASIC programs.
In memory and storage, Goldman favors the HDD and NAND ecosystems given limited near-term supply additions, while analog semiconductor companies with the greatest industrial, aerospace and defense, and datacenter exposure are seen as best positioned within that group.
