Data center stocks bolstered an otherwise battered chip sector Thursday as shares in Facebook’s parent company Meta Platforms Inc halved its profits and capital spending to fuel Mark Zuckerberg’s meta-ambitious ambitions, prompting an analyst to question whether server chips can on it. Just go up now.
As Meta shares fell as much as 25% Thursday, and Nvidia Corp shares fell. NVDA,
up by up to 7%, compared to declines of less than 1% on the PHLX Semiconductor SOX Index,
and the S&P 500 SPX Index,
late on wednesday, Meta reported that quarterly earnings fell more than 50%. It added that it expects capital expenditures in 2022 to be between $32 billion and $33 billion, compared to the previous range of $30 billion to $34 billion. The company said it expects in 2023 capital expenditures in the range of $34 billion to $39 billion, “driven by our investments in data centers, servers and network infrastructure.”
He noted that “the increase in AI capability is driving substantially all of our capital expenditure growth in 2023.”
Shortly after Meta made the announcement, Jefferies analyst Mark Lipacis said in a note that “the positive capex suspension from Alphabet GOOGL,
and Meta “This was all positive for data center equipment providers Nvidia and Advanced Micro Devices Inc. AMD,
Broadcom Inc. AVGO,
and Marvell Technology Inc. MRVL,
Lipacis has buy ratings on all four stocks.
AMD shares are up as much as 5%, Broadcom shares are up as much as 2%, and Marvell shares are up as much as 10% on Thursday. Intel Corp. INTC,
Stocks rose just over 1% at one point before it Earnings report, due after Thursday’s close.
Jefferies noted that Meta’s 2023 capital spending alone charts a 12% year-over-year rise at the midpoint, compared to Wall Street’s consensus of $29 billion, or a 5% year-over-year decline.
“We feel cautious from investors about Nvidia’s data center business this quarter, but we expect all four [equipment providers] To discuss positive data center trends this earnings season,” Libases said, noting that he was a buyer of Nvidia stock “in front of its earnings call.”
From the perspective of the chip industry — which has gone from a global chip deficit of two years to a sudden glut in a matter of months as demand for computers and consumer electronics drops sharply, causing chip makers to pump the brakes on investing in new capacity — Libases wondered whether the glut It would hit data center sales, as many feared.
“The most common comment we hear from investors on Nvidia is that the Datacenter boot should fall,” Libases said, noting that his data shows that the boot is already down and there’s an upside on the horizon.
Libases explained that data center sales from Nvidia, AMD, and Intel combined fell to $10.5 billion in the second quarter from $12 billion in the fourth quarter of 2021 and that he is designing another $10.5 billion in the third quarter.
“This appears to be consistent with the pattern since 2017 of 4 to 5 qtrs above the trend line, followed by 2 to 3 qtrs below the ‘digestion’ trend line, i.e. the data center shoe appears to be already down,” Libases said.
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