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JPMorgan bullish on semiconductor stocks amid new US-China rules

EditorAhmed Abdulazez Abdulkadir
Published 03/12/2024, 11:34
KLAC
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JPMorgan (NYSE:JPM) estimates that the restrictions will impact China's domestic WFE by $6-$8 billion next year. Nevertheless, they project a global WFE growth of over 5% and expect Applied Materials (NASDAQ:AMAT), KLA, and Lam Research (NASDAQ:LRCX) to outperform this figure due to their expansion opportunities in next-generation leading-edge technologies. The firm remains overweight (OW) on the stocks of AMAT, KLAC, and LRCX.

For deeper insights into KLA's financial health and growth prospects, investors can access comprehensive analysis through InvestingPro, which offers detailed metrics, including the company's Fair Value assessment and over 30 additional exclusive ProTips. For deeper insights into KLA's financial health and growth prospects, investors can access comprehensive analysis through InvestingPro, which offers detailed metrics, including the company's Fair Value assessment and over 30 additional exclusive ProTips.

On Monday, the U.S. Department of Commerce's Bureau of Industry and Security issued new regulations aimed at preventing China from advancing its semiconductor manufacturing capabilities for use in next-generation weapons systems and military applications. The measures included adding 140 entities to a restricted list and implementing controls on 24 types of equipment.

JPMorgan estimates that the restrictions will impact China's domestic WFE by $6-$8 billion next year. Nevertheless, they project a global WFE growth of over 5% and expect Applied Materials, KLA, and Lam Research to outperform this figure due to their expansion opportunities in next-generation leading-edge technologies. The firm remains overweight (OW) on the stocks of AMAT, KLAC, and LRCX.

For deeper insights into KLA's financial health and growth prospects, investors can access comprehensive analysis through InvestingPro, which offers detailed metrics, including the company's Fair Value assessment and over 30 additional exclusive ProTips.

Lam Research responded swiftly to the Department of Commerce's announcement, stating that the new rules align with their expectations and that they do not anticipate altering their financial guidance for the December quarter or for CY25. JPMorgan anticipates KLA will express a similar sentiment regarding their CY25 WFE growth outlook at upcoming investor conferences.

JPMorgan estimates that the restrictions will impact China's domestic WFE by $6-$8 billion next year. Nevertheless, they project a global WFE growth of over 5% and expect Applied Materials, KLA, and Lam Research to outperform this figure due to their expansion opportunities in next-generation leading-edge technologies. The firm remains overweight (OW) on the stocks of AMAT, KLAC, and LRCX.

In other recent news, KLA Corporation has announced a strategic transition plan for its Executive Vice President and Chief Strategy Officer, Oreste Donzella, who will assume a part-time senior advisory role from April 14, 2025.

This development is part of a mutual agreement to ensure a smooth transfer of responsibilities. Concurrently, KLA Corporation has reported robust financial performance for the September 2024 quarter, with revenue reaching $2.84 billion and non-GAAP diluted EPS at $7.33, exceeding expectations.

Meanwhile, Citi analysts have expressed a positive outlook on the U.S. semiconductor sector, predicting a 9% year-over-year increase in global sales in 2025. The firm has recommended an aggressive investment approach and issued a 'buy' rating for several companies, including KLA Corporation.

In other company news, Texas Instruments (NASDAQ:TXN) has initiated the production of gallium nitride-based power semiconductors at its Aizu, Japan facility and reported a 9% sequential revenue increase to $4.2 billion in its Q3 2024 earnings call. BofA Securities, however, has revised its price target for Texas Instruments, reducing it to $215 from $220 while maintaining a Neutral rating.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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