Broadcom catching up to Nvidia in sentiment, Citi finds after latest chip survey

After speaking with investors last week, Citi weighed in on the semiconductor industry on Monday with several thoughts on the sector, including the fact that Broadcom (NASDAQ:AVGO) may be catching up to Nvidia (NASDAQ:NVDA) in terms of positive sentiment.

“From our conversations, it seems that AVGO is catching up to NVDA as the top holding as AVGO has more AI customers joining (Open AI and Bytedance) and accretion from VMware,” analysts at the firm wrote in an investor note. “We also believe there is some investor fatigue with NVDA.”

The research firm also found that investors are positive on NXP Semiconductors (NXPI) and Analog Devices (ADI) on back of inventory replenishment.

“Within the analog space, NXPI is still the most favored stock, followed by ADI due to inventory replenishment,” Citi analysts said. The firm still has a Sell rating on NXP, citing the potential for “downside risks given the auto correction.” NXP Semiconductors is slated to report second-quarter results after the close of trading. A consensus of analysts expects the company to earn $3.20 per share on $3.12B in revenue.

Elsewhere in the analog space, Citi pointed out that some hedge funds are starting to buy Texas Instruments (NASDAQ:TXN) on the expectation of earnings upside and lower capex spending.

“We believe in the revenue upside but are doubtful on the lower capex during this earnings season,” Citi wrote. “We think there is a higher possibility of TXN lowering capex sometime before the end of the year.”

The firm also noted that mutual funds are “not keen” on Texas Instruments until they see a bottom in the company’s gross margins.

Citi also said that some hedge funds were buying On Semiconductor (NASDAQ:ON) on the belief of a “beat and raise” during earnings season. Citi recently downgraded to Neutral from Buy, citing risks in the silicon carbide business.

Conversely, Citi said that investors were afraid that AMD (AMD) could see MI300 cuts and Microchip Technology (MCHP) could also see cuts.

“We do not expect MI300 cuts but believe MCHP could guide slightly below Consensus,” Citi wrote.

Citi also opened a negative catalyst watch on Micron (MU), as the firm thinks the stock “could trade poorly for a month as we continue to expect Samsung to qualify HBM at Nvidia and increase capex.”