Zhitong 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 $Broadcom (AVGO.US)$may catch up in positive sentiment.$NVIDIA (NVDA.US)$.

The company's analyst wrote in an investor report, "From our conversations, Broadcom seems to be catching up with Nvidia and gradually becoming a top holding, as Broadcom has more AI customers joining (Open AI and ByteDance), and the 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 about competition, high valuations and geopolitical uncertainty have put pressure on its share price. Nevertheless, Nvidia's share price has still risen by 138% this year, and Broadcom's share price has risen by 41%.

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

In other areas of simulation chips, Citigroup pointed out that some hedge funds are starting to buy Microchip Technology due to expectations of increased profitability and reduced capital expenditure. Citigroup wrote: "We believe revenue will rise, but we are skeptical about the decline in capital expenditure for this financial reporting season. We believe that Texas Instruments is more likely to reduce capital expenditure before the end of this year." Citigroup also pointed out that mutual funds are not interested in Texas Instruments until they see the gross margin bottom out.$Texas Instruments (TXN.US)$Citigroup also said that some hedge funds are buying because they believe that the company will exceed expectations and raise stock prices during the reporting season. However, Citigroup recently downgraded their rating from "buy" to "neutral," citing the risks in the silicon carbide business.

Citigroup also said that some hedge funds are buying.$ON Semiconductor (ON.US)$Because of concerns about the reduction in production of AMD's MI300 and the further reduction in revenue of Microchip Technology, AMD is now considered the least preferred company in investors' eyes. Citigroup said: "We do not expect a reduction in MI300 production, but we believe that Microchip Technology's guidance may be slightly lower than the market consensus."

On the other hand, according to Citigroup, Nvidia is currently considered the most unpopular company among investors.$Advanced Micro Devices (AMD.US)$And$Microchip Technology (MCHP.US)$Concerns about the reduction of AMD's MI300 production and the further reduction in revenue of Microchip Technology are pushing this negative sentiment. Citigroup said: "We do not expect a reduction in MI300 production, but we believe that Microchip Technology's guidance may be slightly lower than the market consensus."

Citigroup also added the stock of Micron to the negative observation list. Citigroup said: "The stock may not perform well within a month, as we expect Samsung to qualify for Nvidia's HBM chip supply in the third quarter of 2024 and increase capital expenditure. Competitive pressure will put pressure on Micron's stock price in the short term."$Micron Technology (MU.US)$Although market sentiment varies, Citigroup is still "extremely bullish" on the entire semiconductor industry. Citigroup's reasons for being bullish on the semiconductor sector include equipment sales exceeding expectations and companies' continued investment in artificial intelligence. Their preferred targets for the financial reporting season are Nvidia, AMD, Broadcom, and other companies mainly related to artificial intelligence. Citigroup believes that although their valuations are high,

there is still room for growth. Citigroup's bullish attitude is echoed by other analysts and investors who are optimistic about the sector's prospects in the short and medium term.$Marvell Technology (MRVL.US)$$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