A trio of microchip earnings next week will provide a comprehensive overview of the current state of global chipmaking demand at a time when artificial intelligence applications are supercharging the thirst for compute, but lingering worries are growing louder.
In the past week, results from Google owner Alphabet and Tesla sparked a wide-scall tech rout as investors cottoned on to the multi-billion scale of spending needed for the AI roll-out.
Next Wednesday, British smartphone microchip design monopolist Arm Holdings PLC (NASDAQ:ARM) will deliver an earnings beat between 5% and 7% above Street consensus, predicts Goldman Sachs.
While a global reduction in smartphone demand has been a bugbear for Arm in recent times, the Cambridge-based chip designer, which licences its blueprints to the biggest tech companies in the world, is making inroads into the AI PC and cloud-computing markets.
Furthermore, Goldman pointed out a recent statement from chip foundry TSMC suggesting that AI could drive a replacement cycle in smartphones and PCs in a few years.
“We maintain our constructive investment posture on ARM as we expect the proliferation of Arm-based processors across various clouds combined with the ongoing transition from the v8 to v9 architecture… to drive sustained margin expansion and earnings growth throughout our forecast period,” said Goldman.
Goldman has a 'buy' rating on Arm shares with a $143 price target against a $157.68 publication price.
Arm reports its first-quarter results on Wednesday, 31 July.
Can AMD advance?
Nvidia Corp’s distant competitor Advanced Micro Devices Inc (NASDAQ:AMD, ETR:AMD) is tipped to deliver results and guidance largely in-line with market expectations, with growth driven by sequential improvements in PC CPUs and server CPUs, and robust performance in data center GPUs.
Gross margins for AMD are expected to see a gradual increase through the end of 2025, said Goldman.
AMD reports its second-quarter earnings on Tuesday, 30 July.
The stock is a buy with a 12-month price target of $175 against a $144.63, according to Goldman.
Lost and foundry
Intel Corp's (NASDAQ:INTC, ETR:INL) revenue guidance could undershoot Street forecasts, warned Goldman.
Intel’s product offering is different from AMD and Arm in that it manufactures as well as designs microchips.
The group has struggled to penetrate this market, given market-leading foundries TSMC and Samsung’s duopolistic stranglehold on the sector.
Goldman predicts that external foundry revenues will see an increase, “albeit off an extremely low base”.
For now, Intel shares are a sell with a $29 price target against a $31.7 publication price.
Intel reports its second-quarter earnings on Thursday, 1 August.