Citi increases bullish stance on chips after hot August sales

Investment firm Citi said it is increasing its bullish stance on the semiconductor space, after data for August came in stronger-than-expected.

“We raise our C24 semi sales forecast from up 14% YoY to up 17% YoY, or $616.6 billion, as we expect above seasonal growth in 3Q24 and seasonal growth in 4Q24,” analyst Christopher Danely wrote in an investor note. “We are forecasting units ex-discretes to be up 1% YoY and ASPs to be up 18% YoY.”

Much of the August strength was driven by dynamic random access memory, which was “above seasonal,” Danely added.

In total, August sales of $56.2B was above Danely’s estimate of $51.4B; and with sales up 15.4% month-over-month, it was above Danely’s estimate of a 5.7% increase and the seasonal increase of a 6.7% rise.

Pricing was “well above seasonality,” as the average selling price ex-discretes rose 14.2% month-over-month, above Danely’s estimate of a 2.7% rise and the seasonal average, which called for a 5.7% increase.

On a year-over-year basis, the average selling price ex-discretes rose 29% year-over-year in August, well above Danely’s estimate of a 16.1% increase.

“With units down 19% in 2023, the worst correction since 2001, we believe there will be inventory replenishment and YoY growth should continue to move upward,” Danely wrote.

Analog Devices (NASDAQ:ADI) is still the firm’s top pick in the space, while it also has Buy ratings on AMD (NASDAQ:AMD), Broadcom (NASDAQ:AVGO), Micron (NASDAQ:MU), Microchip (MCHP) and Texas Instruments (TXN).