Home / Business and Economy / Chip stocks tumble: Citi sees buying opportunity
Chip stocks tumble: Citi sees buying opportunity
3 Aug
Summary
- Citi recommends buying AMD, Texas Instruments, and Applied Materials.
- Data center demand remains strong, while consumer PC/handset demand weakens.
- Big Five cloud providers' capex outlook raised significantly by Citi.
Citi is advising investors to purchase shares in AMD, Texas Instruments, and Applied Materials following a recent 21% decline in the Philadelphia Semiconductor Index. Analysts believe the broader industry fundamentals supporting chip stocks remain largely intact.
While demand for data centers continues to be a strong driver, accounting for 34% of the semiconductor market, consumer demand for PCs and handsets is weakening. This is attributed to rising memory costs and supply chain issues. Despite this, consensus earnings per share estimates for 2026 and 2027 have seen upward revisions for semiconductor companies and equipment makers.
In the memory sector, Korean manufacturers reported mixed results, influenced by their exposure to High Bandwidth Memory (HBM) versus commodity DRAM. DRAM average selling prices saw a mid-40% increase quarter-over-quarter, with further supply shortages anticipated into 2027.
Analog semiconductor demand shows a broad-based recovery, with industrial demand up significantly year-over-year. Citi highlights Texas Instruments as its top analog pick due to its manufacturing capacity advantages.
Furthermore, Citi has increased its capital expenditure growth forecast for the five largest cloud providers, anticipating substantial increases in 2026 and 2027.
