Is Skyworks Solutions, Inc. (NASDAQ:SWKS) A Good Hardware Stock To Buy According To Goldman Sachs?

We recently compiled the list of the 15 Best Hardware Stocks According To Goldman Sachs using the latest sentiment data. In this article, we are going to take a look at where Skyworks Solutions, Inc. (NASDAQ:SWKS) stands against the other hardware stocks.

The soaring popularity of artificial intelligence for consumer and business applications has injected fresh life into the computing industry. If we're to rewind the hands of time and go back to 2022, the stock market environment was considerably different from what it is now. All major technology stocks, including those that are responsible for making chips that power AI workloads were down by double digit percentages in the wake of breakneck inflation and rising interest rates.

Fast forward to 2024 and the rise in valuations seems to have no end in sight. One bank that's quite optimistic about artificial intelligence is Goldman. Goldman's analyst teams are among the best in the world, and they spend countless hours analyzing stocks and industries for the right set of picks that could disrupt the industry.

On this front, Goldman came out with a note recently that outlined a new beginning for the computer hardware industry. According to the bank, the introduction of AI has necessitated a global shift to new hardware that can support the technology. In its note, the bank's analysts shared:

During the pandemic, the tech hardware industry peaked as the majority of work-from-home employees purchased equipment. The space currently has fully unwind this cycle and we notice stocks like HPQ trading at 9x their 2025 earnings estimates.

Most PCs purchased during the pandemic are expected to be replaced soon. We expect discernable new features of AI, enhanced security, and stronger computational power in upcoming PC and mobile device models, incentivizing the US consumer to spend more on newer equipment than historically, creating an unusually stronger cycle.

Goldman also created a basket of stocks where the highest weighted stock has an 8% weight and there are 20 stocks in the basket. According to Goldman analyst Faris Mourad:

The basket is composed of technology hardware stocks that may benefit from PC and mobile device renovations that could include AI features. The basket can trade up to $250m in one day with no name exceeding 10% of ADV.

Considering this optimism, we decided to take a look at the top Goldman's top 15 hardware stock picks.

Our Methodology

To make our list of the top Goldman Sachs hardware stocks, we used the top holdings of the bank's PC & Mobile Device AI Upgrades basket (GSXUPCAI).

For these hardware stocks, we also mentioned hedge fund investors. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

13. Skyworks Solutions, Inc. (NASDAQ:SWKS)

Number of Hedge Fund Shareholders In Q1 2024: 31

Skyworks Solutions, Inc. (NASDAQ:SWKS) is a semiconductor company that designs and sells products such as power management and signals processing systems. The firm is a key supplier to Apple for the iPhone's hardware, and this also led to Rosenblatt reducing Skyworks Solutions, Inc. (NASDAQ:SWKS)'s share price target to $120 from $130 in May 2024. The firm shared that the hardware company faces a slowdown in the smartphone market, and the loss of a key component order from Apple should add to the woes. However, Rosenblatt reiterated a Buy rating on the shares due to Skyworks Solutions, Inc. (NASDAQ:SWKS)'s long term potential.

Unlike semiconductor stocks that are AI favorites, Skyworks Solutions, Inc. (NASDAQ:SWKS)'s forward price to earnings ratio of 15.80 is lower than the market's 21. This indicates that investors expect it to grow slowly when compared to the broader index. Its management is also aware of the slow nature of the market right now, but it also commented on the early stage of the cycle that Goldman mentioned in its report. In a recent earnings call, management shared:

We are in the early innings of a multiyear upgrade cycle, with high end access points now being offered. Over the coming quarters, we anticipate retailers to roll out mainstream models, followed by carriers and MSOs for their gateways and router products. The wireless infrastructure and traditional data center markets remained soft. We continue to undership natural demand as we allow the distribution channel and customers to consume excess inventory. Despite near-term headwinds, we remain bullish on AI workloads, driving upgrades to Ethernet switches and optical modules, a positive long-term driver for our advanced precision timing solutions. Lastly, automotive and industrial markets remain under pressure as they continue to undergo a steep inventory correction.

Overall, SWKS ranks in 13th place among the 15 best hardware stocks to buy according to famed investment bank. You can visit the 15 Best Hardware Stocks According To Goldman to see the other hardware stocks. While we acknowledge the potential of SWKS as an AI investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SWKS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

 

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Disclosure: None. The article was originally published at Insider Monkey.