Texas Instruments (TXN) and Monolithic Power Systems (MPWR) were named top picks at Citi, as the investment firm believes the pair have moved to “phase 2” of its cyclical framework.
“We believe the group is in Phase 2 of our cyclical framework where stocks with product cycles or self-help stories generally outperform the group,” analyst Atif Malik wrote in a note to clients. “We like TXN gross margin expansion potential as it approaches the end of its capital investment cycle and focuses R&D investments in the data center end market. On MPWR, we expect the company to outgrow the industry led by enterprise data sales product growth.”
Delving deeper, Malik said that data center-released sales for analog companies grew between 50% and 70% year-over-year in 2025, well above the combined growth of the analog and microcontroller industry growth of 6%.
“While the data center exposure is still teens sales exposure of most analog companies, we believe the group could sustain multiple re-rating as revenues from the data center end market accelerate to account for more than 25% of sales,” Malik added. “Based on the targets and commentary provided by analog companies, we estimate data center/AI-related revenue for analog companies to grow roughly 70% YoY in 2026.”