Artificial intelligence (AI) has become the great engine of the markets in recent months, with the American Nvidia as the banner of this technological revolution. With a revaluation of 188% in the last 12 months, the American graphics card manufacturer has reoriented its chips towards the development and training of AI models, a market in which it has hardly any competition. But experts are committed to looking beyond, not only Nvidia, but also the famous magnificent seven (Apple, Amazon, Meta, Tesla, Nvidia, Alphabet, Microsoft): in the universe of European equities there are attractive opportunities to rise to the crest of the new business while managing to diversify the risks.
The most repeated name is ASML, the company that manufactures lithography machines used for the production of chips. With a rise of 29.16% so far this year and a capitalization of 351,834 million euros, the Dutch company is approaching the French luxury firm LVMH and threatens to snatch its position as the most valuable listed company in the Euro Stoxx 50. Since the annual highs recorded in March, LVMH corrected 15.34% and limited profits for the year to 0.6%, leaving its stock market value at 369,104.6 million. The company is progressively moving away from the half billion capitalization it achieved in April 2023, a mark that in Europe was only matched months later by Novo Nordisk, the manufacturer of Ozempic, Danish and therefore outside the euro zone.
The firm has two key ingredients: it benefits from the high demand for chip manufacturing plants, both due to the need for diversification in Europe and the US and the need for new equipment for AI, and it operates under a quasi-monopoly regime: No one else manufactures the highly sophisticated printing machines with increasingly smaller and, therefore, more powerful circuits.
Although in the first quarter revenues fell 21%, to 5,290 million and profits contracted 37% (1,224 million), analysts continue to be optimistic about the future of the Dutch company. 75% of the firms that follow the value advise buying shares of the company, compared to 30% that recommend keeping in the portfolio; The remaining 5% believe that at this level the most advisable thing would be to collect profits. The company’s confidence in the future is also reflected in its valuations. The consensus of the analysts consulted by Bloomberg sets the target price at 1,013.97 euros. That is, they grant it a revaluation potential of more than 15%.
Bank of America, Goldman Sachs and Citi are some of the firms that advise buying shares of the European technology company. Although all three set a price target above the Bloomberg average, Citi is by far the most optimistic. The US entity establishes a ceiling of 1,250 euros. That is, they grant it a potential close to 42%. The listed company is part of the super 7 club – along with Novo Nordisk, LVMH, SAP, Schneider, Richemont and Ferrari -, quality companies that offer attractive margins and are listed at more affordable ratios.
Goldman Sachs analysts reiterate their buy advice and consider that the strong demand for 2 nanometer (nm) chips, which offer high performance and speeds that exceed 3 nm chips by 10-15%, together with the improvement of memory, will serve as a boost to orders in the coming quarters. Yesterday the firm’s shares rose 1.1%, boosted by the plans of the American companies Nvidia and Advanced Micro Devices (AMD) to launch new artificial intelligence chips.
Far from half a billion
From the highs of 949.2 euros recorded in March 2023, LVHM fell 18.18%. The failure to meet forecasts by firms such as Kering have taken the shine off the luxury business. This sector, which last year served as a boost to the French stock market, limits profits this year to 4.6%, far removed from the 12.28% achieved by technology companies or the 20.7% achieved by banks, this The latter has been driven by good results and corporate operations.
All in all, although the drop in Asian demand is a source of concern for luxury companies, experts believe that within this universe LVMH is the most attractive option. Bank of America believes that the gap between winners and losers will increase. Despite this, experts believe that the worst for the French company has already passed and that the more defensive profile of its income and profits in a context of lower growth will support its valuations compared to competitors. The firm’s experts advise buying shares and set a target price of 1,000 euros, well above the 867.3 established by the Bloomberg consensus.
Analysts point out that after the explosion in demand, the luxury sector is going through a period of normalization. The analysis department of the American entity believes that the 15.34% correction that the securities have suffered since last March is sufficient. LVHM’s exposure to a sector with structural growth, high barriers to entry, a solid portfolio of brands and the best management team are the reasons that lead it to choose the firm as its preferred option.
Far from US valuations
Europe. While LVMH and ASML are fighting to take over the position of the most valuable firm in the euro zone, the Danish Novo Nordisk is by far the most capitalized European listed company. With a revaluation of 32.3% so far this year, the manufacturer of Ozempic achieves a stock market value of 4.12 billion Danish crowns (about 553,096 million euros). The good results achieved in the first quarter of the year and the expectations generated by medications to treat diabetes and lose weight are fuel to prolong the rally. 61.8% of analysis firms advise buying shares, compared to 26.5% that recommend keeping in the portfolio and only 11.8% opt for taking profits.
Wall Street. Although the numbers of ASML, LVMH and Novo Nordisk are dizzying, their valuations are far from those registered by the big American names. The presentation of results has helped Microsoft confirm itself as the most valuable stock with a capitalization of three billion dollars. One step below is Apple (2.97 billion) and Nvidia (2.79 billion) closes the podium. Amazon’s capitalization is around 1.84 million, compared to Meta’s 1.2 billion and Tesla’s $561.8 billion. Outside the United States and Europe, Saudi Aramco stands out with a capitalization of around $1.86 trillion.
Follow all the information Five days in Facebook, x and Linkedinor in our newsletter Five Day Agenda
Newsletters
Sign up to receive exclusive economic information and the financial news most relevant to you
Sign up!
