I'm LongbridgeAI, I can summarize articles.Citi recommends buying AMD, Texas Instruments, and Applied Materials following a semiconductor selloff, viewing the dip as a reaction to high expectations rather than weak demand. The bank cites strong AI data center demand and recovering industrial/automotive sectors. Citi highlights AMD for compute chip market share gains, TXN for analog chip recovery, and AMAT for sustained equipment spending driven by AI infrastructure expansion.
Semiconductor stocks have pulled back sharply after this year's AI-driven rally as investors took profits and questioned whether the sector could sustain its rapid growth. Citi believes the recent weakness reflects high investor expectations rather than weaker demand. The bank said the industry's long-term outlook remains strong and highlighted Advanced Micro Devices (AMD), Texas Instruments (TXN), and Applied Materials (AMAT) as its preferred chip stocks after the recent selloff.
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Why Citi Remains Bullish on Chip Stocks
Citi said demand from AI data centers remains strong. At the same time, demand from the industrial and automotive markets continues to recover. However, the bank said PC and smartphone demand remains weak because higher memory prices have pushed up costs.
The bank also expects AI spending to stay strong after Alphabet (GOOGL) and Amazon (AMZN) raised their capital spending plans. Citi believes those investments will continue driving demand for chips and chipmaking equipment.
Why Citi Picked These Three Stocks
1. AMD Stock: Citi continues to rate AMD as its top compute chip pick. The bank expects the company to gain market share in both graphics processing units (GPUs) and central processing units (CPUs) as cloud companies expand their AI infrastructure.
Notably, AMD is scheduled to report its second-quarter earnings after the market closes on August 4. Wall Street expects AMD to report earnings per share (EPS) of $1.62, up more than 237% from a year ago. Revenue is expected to rise 47% to $11.31 billion.
2. TXN Stock: For analog chips, Citi favors Texas Instruments. The bank expects the recovery in industrial and automotive demand to support the company's growth. It also noted that longer delivery times and higher prices continue to benefit analog chipmakers.
Recently, Texas Instruments reported strong Q2 results, with earnings coming in at $2.14 a share, well above analyst estimates of $1.94. Revenue surged 23% year-over-year to a record $5.46 billion, surpassing Wall Street's forecast of $5.26 billion in sales. Following the results, several analysts have upgraded the stock. For instance, Tristan Gerra at Baird raised his price target on TXN stock to $385 from $300 and reiterated a Buy-equivalent outperform rating on the shares.
3. AMAT Stock: Meanwhile, Citi placed Applied Materials on a positive 30-day catalyst watch ahead of its August 13 earnings report. The bank believes spending on chipmaking equipment will remain strong as chipmakers continue expanding capacity to meet AI demand. Wall Street expects AMAT to report earnings per share (EPS) of $3.39 on revenue of $9.0 billion.
Wall Street's View on These 3 Chip Stocks
Using TipRanks' Stock Comparison Tool, we compared Advanced Micro Devices, Texas Instruments, and Applied Materials to see which offers the highest upside based on Wall Street analyst forecasts.
Among the three, Applied Materials offers the highest upside potential at about 26.6% and carries a Strong Buy consensus rating. Texas Instruments follows with roughly 22.5% upside and a Moderate Buy rating, while Advanced Micro Devices offers about 21.4% upside with a Strong Buy rating.