Recently, due to macroeconomic headwinds and disappointing financial reports under high expectations, the semiconductor stocks have experienced a sharp decline.
Market outlook for the second half of 2024: AI trend and investment strategy for 2024.
According to analysts from Citibank, market expectations for the earnings season have fallen by 11%, mainly due to the performance of Intel, GlobalFoundries, Microchip Technology and NXP Semiconductors being lower than expected. This decline is due to slower-than-expected analog inventory replenishment and downward risks in the automotive terminal market, which accounts for 14% of semiconductor demand.
However, analysts remain bullish on the industry due to strong demand for artificial intelligence and memory. They stated that 'the main reason we remain bullish on the industry - strong demands for AI and memory - remains unchanged.'
Citibank sees Micron Technology as the preferred option. The bank's analysts believe that 'now is the time to add positions as the DRAM market recovery trend should continue due to capacity reduction and DRAM prices being better than expected in the third quarter of 2024.'
DRAM market continues to improve, with strong performances from Samsung and SK Hynix. Citibank predicts that DRAM prices for 2024 will increase by 62% year-on-year, and notes that DRAM prices for the third quarter of 2024 might rise by mid-single digits, surpassing the market's expectations for low single-digit growth.
Citibank's semiconductor analyst recently revised their 2024 DRAM price growth forecast from 53% YoY to 62%, primarily due to limited supply growth and memory manufacturers allocating capacity to high-bandwidth memory (HBM).
Despite weakness in the automotive and industrial terminal markets, the demand trend for the top three terminal markets - personal computers, mobile phones, and servers - is still relatively healthy, accounting for 61% of semiconductor demand.
Micron stated that the inventory of traditional data center markets will improve in the first half of 2024 and is expected to grow in the second half of 2024.
Analysts pointed out, 'we expect Micron to raise guidance in the September earnings report.' The memory chip manufacturer's stock has fallen more than 30% in the past month, reaching the lowest level since February.
Overall, Citibank analysts predict that semiconductor sales will grow by 14% in 2024 and reach $603.2 billion. They expect seasonal growth in the third and fourth quarters of 2024 after above-seasonal growth in the second quarter.
In addition, they predict a 3% YoY growth in unit sales, excluding discrete components, with an average selling price (ASP) increase of 13% YoY.
In addition to Micron, Citibank's other semiconductor stocks rated as 'buy' include AMD, Broadcom, Analog Devices, Microchip Technology, NVIDIA, and KLA Corporation.