Strategist names 3 chip stocks in a 'very, very good position right now'

Published Tue, Jun 14 20227:43 PM EDTUpdated Thu, Jun 16 20221:01 AM EDT

Semiconductor stocks have had a rough ride so far in 2022, but some parts of the sector remain solidly positioned, according to Cascend Securities' Eric Ross. "I think that there's pieces that are very, very stable and there's pieces that are not doing so well," Ross, chief investment strategist at the firm, told CNBC's " Street Signs Asia " on Thursday. Ross' comments come as investors have largely fled the semiconductor space against the backdrop of broader risk-off sentiment. The VanEck Semiconductor ETF, which trades under the ticker SMH , has fallen more than 30% so far this year. Some "choppiness" may be experienced in sectors such as personal computing and consumer spending, he said, but that's not the case for areas such as data center expenditure, autos and industrials. "Certainly if we're going into a recessionary cycle there's nothing the chip makers can do to prevent getting hit at some level," Ross said. But he added that firms such as TSMC , Nvidia and ASM Lithography were in a "very, very good position right now." "Nvidia said very specifically they just can't get enough of their GPUs [graphics processing unit] and particularly GPUs into the data centers. So I think it depends where you are in the semiconductor cycle here," he said. In the case of TSMC, a major Apple supplier, Ross described its recent guidance of 30% growth in revenues this year as "very spectacular" given the current environment. He warned, however, that TSMC may be the exception rather than the rule. "I do want people to remember that just because TSMC sees this 30% growth, doesn't mean that the chipmakers are going to see that. A lot of that is actually because TSMC is able to have pricing power," Ross said. "We've already seen even recently TSMC raised prices by roughly 9% in the last quarter. So we think a lot of that topside that TSMC is seeing is because they have control over prices and their customers desperately need what [TSMC] is selling and they can't get it elsewhere," he added. Intel's longer-term problem Intel may be having difficulties with the supply of its processors at the high end for data centers, Ross said, but the firm faces a "longer-term bigger problem." "They're so behind technology wise from TSMC," the strategist said. As a result, Intel's competitors like Nvidia and Advanced Micro Devices can "walk all over" the firm by using TSMC's technology, he added. In late April, Intel reported weaker-than-expected guidance for its fiscal second quarter . Under incumbent CEO Pat Gelsinger, Intel is on an ambitious plan to catch and surpass Samsung and TSMC by 2025 after years of lagging behind the Asian chip giants.