Zhongtong Finance learned that after talking with investors last week, Citigroup evaluated the semiconductor industry on Monday and put forward some new views on the industry, including$Broadcom (AVGO.US)$positive sentiment may catch up$NVIDIA (NVDA.US)$.

The company's analysts wrote in an investor report, "From our conversations, it seems that Broadcom is catching up with Nvidia and is gradually becoming a top holding, as Broadcom has more AI customers joined (Open AI and ByteDance), and business from VMware is also increasing. We also believe that some investors are tired of Nvidia." Nvidia is the most popular technology stock this year. However, concerns over competition, high valuation, and geopolitical uncertainty have weighed on its stock price. Nonetheless, Nvidia's stock price has still risen 138% this year, while Broadcom's stock price has risen 41%.

Citigroup also found that due to inventory replenishment, investors are bullish on$NXP Semiconductors (NXPI.US)$And.$Analog Devices (ADI.US)$Citigroup analyst said: 'In the analog field, thanks to inventory replenishment, NXP Semiconductors is still the most popular stock, followed by Analog Devices.' However, Citigroup's rating of NXP Semiconductors remains 'sell' due to 'downside risks' given the stock's self-correction. NXP Semiconductors is scheduled to announce its second-quarter results after Monday's post-market trading. Analysts generally expect the company's revenue to be $3.12 billion and earnings per share to be $3.20.

In other areas of analog chips, Citigroup pointed out that some hedge funds are starting to buy$Texas Instruments (TXN.US)$, because they expect the company's profits to rise and capital expenditures to decrease. Citigroup wrote: 'We believe revenue will rise, but we are skeptical about capital expenditures declining this quarter. We think there is more room for Texas Instruments to reduce capital expenditures before the end of this year.' Citigroup also pointed out that mutual funds are 'not interested' in Texas Instruments until they see the bottom of the gross margin.

Citigroup also said that some hedge funds are buying$ON Semiconductor (ON.US)$, because they believe the company will 'exceed expectations and raise stock prices' during the earnings season. But Citigroup recently downgraded its rating from 'buy' to 'neutral', citing risks in the silicon carbide business.

On the other hand, according to Citigroup, Microchip Technology is currently considered the least favored company by investors. Concerns about AMD's MI300 production cut and further revenue decline at Microchip Technology are driving this negative sentiment. Citigroup said: 'We expect MI300 production to not decrease, but we think Microchip Technology's guidance may be slightly below market consensus.'$Advanced Micro Devices (AMD.US)$And$Microchip Technology (MCHP.US)$Citigroup also put 'Micro' stock on its negative watchlist. Citigroup said: 'The stock may underperform in the next month because we expect Samsung to qualify for Nvidia's HBM chips in the third quarter of 2024 and increase capital expenditures. Competition pressure will put pressure on Micron's stock price in the short term.'

Despite varying market sentiments, Citigroup remains 'extremely bullish' on the entire semiconductor industry. The reasons Citigroup is bullish on the semiconductor sector include stronger-than-expected equipment sales and ongoing spending on artificial intelligence by companies. During the earnings season, the company's top targets are Nvidia, AMD, Broadcom and other companies mainly related to artificial intelligence. Citigroup believes that although valuations are high, $Micron Technology (MU.US)$Citigroup recently downgraded Broadcom's stock rating from 'buy' to 'neutral', citing downside risks in silica carbide.

Citigroup also said that some hedge funds are buying$Marvell Technology (MRVL.US)$, because they believe the company will 'exceed expectations and raise stock prices' during the earnings season. But Citigroup recently downgraded its rating from 'buy' to 'neutral', citing risks in the silicon carbide business.$PHLX Semiconductor Index (.SOX.US)$Therefore, Danely raised the target prices for Qualcomm and On Semiconductor from $150 and $185 to $220 and $200 respectively, and also raised the expected returns.

Citigroup analyst Christopher Danely wrote in an investor report: "We expect inventory replenishment in the industrial end market, the advantages of AI, and the stabilization of PC, wireless and data center end markets (which represent 62% of half-finished product sales) and better data/guidance from analog chip companies to be positive catalysts for the semiconductor field in the Q2 2024 earnings season. Although valuations are high, we believe that (PHLX semiconductor index) can continue to rise, citing our first rule of semiconductor investment: 'Do not buy or sell based on valuations.'"

Editor/Emily