NEW YORK (Associated Press) - Citi Investment Research is moving to a "decidedly positive stance" on the semiconductor sector, wrote analyst Glen Yeung in a note to investors Monday, upgrading three chip and chip-equipment companies.
Yeung said that, given in part the "dramatic declines in chip stocks in the past 12 months," he thinks the risk-and-reward ratio has become favorable on the sector.
"We remain vigilant in our stance that despite a woeful economic forecast, the forthcoming semiconductor downcycle will not be as severe as past cycles given today's well-controlled inventory environment," the analyst wrote in a note to investors.
Yeung said he recommends Qualcomm Inc., Nvidia Corp., Intel Corp., Altera Corp., STMicroelectronics NV and Integrated Device Technology Inc.
Of these, he upgraded Integrated Device, Nvidia and STMicroelectronics to "Buy" from "Hold;" he already had "Buy" ratings on the others. Yeung called Integrated Device a defensive stock, adding that with growth opportunities in new products, limited short-term risk and a good valuation, "investors will be rewarded in the medium-term."
The analyst also said that Nvidia, which has lost "noticeable" market share to Advanced Micro Devices Inc., will likely regain some as its products are "apt to be more competitive relative to AMD in early 2009."
The chip sector has taken a beating this year, with sector leader Intel's shares down nearly 40 percent year-to-date and graphics chip maker Nvidia down about 74 percent, for example.
Last week, the Semiconductor Industry Association said chip sales grew 1.6 percent in September, as demand grew for some memory products but pricing pressures continued to hurt sales. Excluding memory products, however the group reported chip sales rose 7.8 percent year over year.