Investing in Chip Stocks: Citigroup Suggests Buying Opportunity
In the world of investing, timing is everything. This week, Citigroup analysts are suggesting that the recent rout in chip stocks presents a buying opportunity for savvy investors. According to analyst Christopher Danely, now is the time to double down on Micron, as the dynamic random access memory (DRAM) market is expected to remain tight due to the industry’s oligopoly structure.
As the technology sector has experienced a pullback since mid-June, chip stocks have also taken a hit. Contributing to the sector’s weakness were disappointing results from semiconductor and semiconductor equipment companies, causing the VanEck Semiconductor ETF to slump 21% over the last month. Danely pointed out that at the peak, the PHLX Semiconductor Sector Index was trading at a 70% premium to the S&P, its highest valuation since 2008.
Despite the recent challenges, Citigroup remains bullish on certain chip stocks. Along with Micron, Danely highlighted Advanced Micro Devices, Nvidia, and Analog Devices as top buy-rated names. He emphasized that the fundamentals of the artificial intelligence and memory markets remain strong, with AI capital expenditures increasing and DRAM pricing exceeding expectations in the third quarter of 2024.
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