Inflation increased 8.3% in August, increasing the probability of another 75-bps federal rate hike this month. On the other hand, the interest rate-sensitive and tech-heavy NASDAQ composite lost 25.6% year-to-date.
Amid the macro headwinds, popular tech company NVIDIA Corporation (NVDA) missed consensus revenue and EPS estimates in its second quarter ended July 31, 2022. NVDA's CFO, Colette Kress, said, "Macroeconomic headwinds across the world drove a sudden slowdown in consumer demand for the company's gaming products."
Analysts expect NVDA's revenue to decrease 18.5% year-over-year for the quarter ending January 2023, while its EPS is expected to fall 37.7% year-over-year. The stock has lost 40.7% over the past year to close the trading session at $131.31.
However, demand for tech goods and services is growing amid the increasing adoption of cloud computing, artificial intelligence (AI), virtual reality (VR), and the internet of things (IoT). The global technology market is expected to grow at a CAGR of 25.7% from 2022 to 2027.
Given this backdrop, we think investors wanting to avoid NVDA could invest in fundamentally sound tech stocks Broadcom Inc. (AVGO), QUALCOMM Incorporated (QCOM), and CEVA, Inc. (CEVA).
Broadcom Inc. (AVGO)
AVGO creates, manufactures, and distributes a range of semiconductor products focusing on analog III-V-based products and complicated digital and mixed signal complementary metal oxide semiconductor-based devices globally. The company operates in two segments, Semiconductor Solutions and Infrastructure Software.
On September 6, 2022, AVGO announced the delivery of its Trident 4C Ethernet switch ASIC, 12.8 terabits/second security switch. This product detects flow anomalies in real-time and is a one-of-its-kind weapon against cyber threats.
Also, on August 22, 2022, AVGO and Tencent Holdings Limited (TCEHY) announced their strategic agreement to enhance the uptake of high bandwidth co-packaged optics network switches for cloud infrastructure.
These new ventures are expected to diversify AVGO's portfolio and fortify growth.
AVGO's net revenues came in at $8.46 billion for the third quarter ended July 31, 2022, up 24.9% year-over-year. Moreover, its net income came in at $3 billion, up 66.4% year-over-year. Also, its EPS came in at $7.15, up 70.2% year-over-year.
Analysts expect AVGO's revenue to increase 20.9% year-over-year to $33.18 billion in 2022. Its EPS is expected to increase 33.6% year-over-year to $37.42 in 2022. It surpassed EPS estimates in all four trailing quarters. Over the past year, the stock has gained marginally to close the last trading session at $503.65.
AVGO's strong fundamentals are reflected in its POWR Ratings. The stock's overall A rating indicates a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
AVGO has an A grade for Quality and a B grade for Growth and Sentiment. In the B-rated Semiconductor & Wireless Chip industry, it is ranked #3 out of 94 stocks. Click here for the additional POWR Ratings for Value, Momentum, and Stability for AVGO.
QUALCOMM Incorporated (QCOM)
QCOM is involved in creating and marketing critical technologies for the global wireless market. The company operates through three segments: Qualcomm CDMA Technologies (QCT); Qualcomm Technology Licensing (QTL); and Qualcomm Strategic Initiatives (QSI).
On July 27, 2022, QCOM strengthened its strategic partnership with Samsung Electronics Co., Ltd., aiming to deliver a premium consumer experience for Samsung Galaxy devices buyers. This move is expected to enhance both companies' consumer bases.
QCOM's total revenues came in at $10.94 billion for the third quarter ended June 26, 2022, up 35.7% year-over-year. Moreover, its net income came in at $3.73 billion, up 84% year-over-year. Also, its EPS came in at $3.29, up 85.9% year-over-year.
QCOM's revenue is expected to increase 32% year-over-year to $44.18 billion in 2022. Its EPS is expected to increase by 14.3% per annum for the next five years. It surpassed EPS estimates in all four trailing quarters. QCOM's shares have lost 6.1% intraday to close the last trading session at $124.93.
QCOM's overall B rating equates to a Buy in our POWR Ratings system. It has a B grade for Value, Sentiment, and Quality. It is ranked #13 in the Semiconductor & Wireless Chip industry. Beyond what is stated above, we've also rated QCOM for Stability, Momentum, and Growth. Get all QCOM ratings here.
CEVA, Inc. (CEVA)
CEVA operates as a licensor of wireless connectivity and intelligent sensing technologies to semiconductor and original equipment manufacturer (OEM) companies worldwide. It develops and licenses digital signal processors, artificial intelligence processors, wireless platforms, and accompanying software.
On June 27, 2022, CEVA and Flex Logix® Technologies, Inc. announced the world's first successful silicon implementation using Flex Logix's EFLX® embedded FPGA (eFPGA) connected to a CEVA-X2 DSP instruction extension interface.
Erez Bar-Niv, CEVA's Chief Technology Officer, said, "Flex Logix and CEVA's mutual customers can now confidently utilize custom instructions to extract more value from their ASIC."
CEVA's total revenues came in at $33.20 million for the second quarter ended June 30, 2022, up 9% year-over-year. Moreover, its licensing, NRE, and related revenues came in at $22.12 million, up 42.4% year-over-year. Also, its total current liabilities came in at $31.59 million for the period ended June 30, 2022, compared to $35.44 million for the period ended December 31, 2021.
Street expects CEVA's revenue to increase 13.8% year-over-year to $139.68 billion in 2022. Its EPS is expected to increase by 25.7% per annum for the next five years. It surpassed EPS estimates in all four trailing quarters. CEVA's shares have lost 3.5% intraday to close the last trading session at $28.37.
CEVA's overall B rating equates to a Buy in our POWR Ratings system. It has a B grade for Growth and Quality. It is ranked #12 in the same industry. We have also rated CEVA for Sentiment, Stability, Momentum, and Growth. Get all CEVA ratings here.
AVGO shares were trading at $512.12 per share on Wednesday afternoon, up $8.47 (+1.68%). Year-to-date, AVGO has declined -21.87%, versus a -16.16% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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