Stock market today: S&P 500 climbs as health care, tech gain; Nvidia earnings loom
Investing.com -- Citi maintains a positive view on the U.S. chip sector, highlighting continued strength in the AI space and an anticipated rebound in the analog market.
The Wall Street giant projects a substantial increase in AI spending, forecasting a 50% year-over-year (YoY) growth by 2025, led by tech giants like Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), Meta (NASDAQ:META), and Amazon (NASDAQ:AMZN).
This exceeds Citi’s earlier estimate of a 40% YoY increase, following higher capital expenditures (capex) from Meta and Amazon, alongside Stargate’s commitment to a $100 billion data center investment.
The firm’s strategists believe this trend bodes well for AI-related stocks, especially Nvidia (NASDAQ:NVDA), Micron (NASDAQ:MU), Marvell (NASDAQ:MRVL) Technology, and Broadcom (NASDAQ:AVGO).
In the analog semiconductor space, Citi identifies Texas Instruments (NASDAQ:TXN) as its top pick, citing a potential recovery driven by a resurgence in the industrial end market, which accounts for approximately 35% of analog sales.
The bank expects analog companies’ quarterly earnings per share (EPS) to surge by about 70% by the second half of 2026. Citi’s other favored stocks in this category include Microchip Technology (NASDAQ:MCHP), Analog Devices (NASDAQ:ADI), and NXP Semiconductors (NASDAQ:NXPI).
While forecasting continued weakness in auto-related sales, which account for about 45% of analog semiconductor revenue, Citi believes this will be balanced by a recovery in industrial demand and seasonal strength in the consumer and data center segments.
For Micron, its top pick within the chip sector, Citi said it expects a recovery in commodity Dynamic Random-Access Memory (DRAM), starting in the second quarter of 2025.
“We continue to believe that DRAM pricing should improve beginning in 2Q25 and the DRAM market will recover given supply/demand dynamics for C25 and increasing high bandwidth memory (HBM) revenue,” strategists said.
Spot pricing for DRAM has already seen a 14% increase year-to-date, marking the largest rise since the first quarter of 2024.
Overall, Citi forecasts total semiconductor sales to rise 13% year-over-year in 2025, increasing from $627.6 billion in 2024 to $709.8 billion, driven by a 13% increase in units and a 1% rise in average selling prices.