New Street Research analyst Pierre Ferragu has named his top global technology stock picks, as he assesses the potential impact of the Russia-Ukraine conflict on the sector. Russia's war with Ukraine is expected to have "minimal direct impact" on the tech sector, according to Ferragu and his team at New Street. The research firm notes that Russia accounts for just 2% of global gross domestic product, 1% of global tech spending and just 0.1% of global semiconductor sales. "Russia barely exists for tech," Ferragu said in a note published on March 6. The crisis may present opportunities for several tech stocks as countries around the world accelerate their domestic manufacturing initiatives, particularly in leading-edge technologies, while speeding up the use of renewable energy and electrification. New Street notes that the strategic nature of semiconductor manufacturing has been in the spotlight in the past few years, with many government and industry initiatives to develop local regional capabilities. "It seems obvious to us that the current conflict will bring this concern even more on the front burner, both for governments looking at their strategic autarky, and enterprises looking at their safety of supply," Ferragu said. Within this space, the research firm likes U.S chip giant Intel and sees the company bagging "whale clients" for its leading-edge foundry services as a "nearly unavoidable" development. The research firm added it now has a "much higher level of confidence" that Intel will be able to sign these clients by the end of the year. Russia's invasion of Ukraine is also a positive for the Taiwan Semiconductor Manufacturing Company (TSMC), Ferragu said. The research firm noted that it is now "much less worried" about an invasion of Taiwan, with a military option "more or less off the table." "This is a strong positive for TSMC … and will strengthen the company's position as the most cost-efficient foundry in the world," Ferragu said. He added that while alternative suppliers will emerge and take some market share, he believes TSMC will remain a superior market leader in terms of experience, scale and cost-efficiency. "TSMC may lose a few points of market share over a decade, but in a fast-growing market and with no negative impact on margins," he added. Renewable energy and electrification in focus In addition, the research firm believes that the conflict will also bring about an acceleration in renewable energy and electrification as the world seeks to wean itself off its dependence on Russian oil. "It is very clear that, in a world which needs to reduce its dependence on Russia to zero, and more broadly on net exporters of energy and critical commodities and products; renewable energy, energy storage, electric vehicles, and the broader electrification of the economy will have multi-decade tailwinds," Ferragu said. Against this backdrop, the research firm said a good number of companies will benefit enormously, including electric maker Tesla , as well as high-performance power chip manufacturers Infineon and Wolfspeed .
A Ukrainian military vehicle speeds by on a main road near Sytnyaky, Ukraine, Thursday, March 3, 2022.
Marcus Yam | Los Angeles Times | Getty Images
New Street Research analyst Pierre Ferragu has named his top global technology stock picks, as he assesses the potential impact of the Russia-Ukraine conflict on the sector.