Bank of America named European chip stocks ASM International and STMicro as its “top picks” going into the end of the year. The Wall Street bank said it continues to favor ASMI with a 521 euro ($559) price target, which represents 25% upside potential from the current share price. Shares of the Dutch manufacturer of semiconductor equipment are also traded in the United States. The analysts believe ASMI’s upcoming capital markets day on Sept. 26 “should act as a positive catalyst for the stock.” They think the company’s strong positioning in epitaxy, a manufacturing process used to make components required for chipmaking, means it should command a premium valuation. The investment bank also named STMicro , a chipmaker with a focus on the automotive sector, as its “top autos semis pick.” Bank of America’s $72 price target for STM points to a 62% upside potential over the next 12 months. Shares of the company are also traded on the Paris stock exchange for European investors. STM ASMXF YTD line Bank of America analysts cited “resilient pricing and secular growth drivers in silicon carbide (SiC)” as reasons the stock should benefit into year-end. Silicon carbide is used in power components for electric vehicles. “We keep on seeing potential for STM to re-rate towards the end of the year given recent comments of CEO at a conference,” said Bank of America equity analysts led by Didier Scemama in a note to clients on Sept. 11. STM CEO Jean-Marc Chery said the company is expected to benefit from the ongoing strength in automotive and industrial demand, tight supply conditions in SiC where STM is a leader, and pricing power with carmakers. Bank of America cautioned that mixed signals on smartphone demand are an issue for the semiconductor sector more broadly. However, they view artificial intelligence-driven growth for chip demand as positive for ASMI and STM, given their heavy exposure to the segment.
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