Citi is still bullish on chips despite yesterday’s sell-off after July data

Investment firm Citi said it is still bullish on the semiconductor space, despite yesterday’s crash in several stocks in the sector, as data for July showed a continued resurgence in sales.

“Over the weekend, the [Semiconductor Industry Association] announced July monthly sales of $48.7 billion (down 10.8% MoM), slightly above our estimate of $48.4 billion (down 11.3% MoM) but below seasonality of down 7.7% MoM due to below-seasonal units,” Citi analyst Christopher Danely wrote in an investor note. “With units down 19% in 2023, the worst correction since 2001, we believe there will be inventory replenishment in 2024. We maintain our 2024 semi sales forecast of up 14% YoY.”

Micron (NASDAQ:MU) is still the firm’s top pick, as the firm continues to benefit from strong pricing for dynamic random access memory, which is expected to rise 66% year-over-year in 2024 and 14% in 2025.

Along with Micron, Citi has Buy ratings on AMD (AMD), Broadcom (AVGO), Analog Devices (ADI), Microchip Technology (MCHP) and Texas Instruments (TXN).

In July, the SIA noted that the average selling price excluding discretes, fell 0.1% month-over-month, above Danely’s estimate of a 6.9% decline and the seasonal decline of down 1.6%, due to higher DRAM pricing. DRAM pricing was up 22% month-over-month, above the seasonal 7% increase.

On a year-over-year basis, the average selling price excluding discretes rose 20.1%, above Danely’s estimate of a 12% increase.

July unit growth excluding discretes fell 10.5% month-over-month, the SIA said, below Danley’s estimate of a 5.2% decline and the seasonal decline of 6%. On a year-over-year basis, units were up 0.2%, below Danely’s estimate of 6.2%.