Bank of America: Chip stocks are expected to start recovering in October, with Nvidia (NVDA. US) and others performing exceptionally well

According to Zhitong Finance, semiconductor stocks have been fluctuating in recent weeks. Although some on Wall Street believe that this turbulence may continue until the end of the US election, Bank of America believes that the recovery of this sector may be earlier than the US election. Bank of America analyst Vivek Arya wrote in an investor report, "The volatility may continue until Nvidia releases its results in late August, and then into September, which is the worst month in history for the Philadelphia Semiconductor Index, with 70% of the time falling. The US election and ongoing geopolitical tensions have added additional uncertainty. However, if history can serve as a guide, the index may begin to recover from October, with the fourth and first quarters being the two strongest quarters for semiconductor stocks (with an average return rate of 7-10.5%, more than 400 basis points higher than the S&P 500 index)
Nvidia is scheduled to announce its quarterly results after market hours on August 28th local time. Analysts generally expect the company's Q2 revenue to be $28.54 billion, with earnings per share of $0.64.
Arya added that the semiconductor industry is only in the fourth quarter of its upward cycle, and the Philadelphia Semiconductor Index has already generated a 28% return. The previous upward cycle lasted for 10 quarters, bringing an average return of 67% to the index.
The investment bank stated that if the chip industry returns to its baseline rebound scenario, Nvidia, Broadcom (AVGO. US), and KLAC. US may be the three performing stocks. The investment bank stated that if volatility continues to rise and demand decreases, Broadcom and Cadence Design Systems (CDNS US and Synopsys (SNPS. US) may perform well. On the other hand, if there is a recovery, stocks such as Arm (ARM. US), Micron Technology (MU. US), and ON. US will perform well, "Arya said.