In CNBC’s article, “Citi believes this week’s chip stock drop is a buying opportunity, especially in one name.” Samantha Subin quotes analyst Christopher Danely saying, “We think it’s time to double down on Micron as we believe the [dynamic random access memory] market will remain tight given the oligopoly, AI, and memory still driving the bus – we’re still positive,” This week’s drop in semiconductor stocks, especially Micron’s, might be a good buying chance for investors, according to Citigroup’s latest review. Christopher Danely, a top analyst at Citi, sees the recent decline in chip stocks as a potential investment opportunity rather than a warning sign. He believes the DRAM market will remain tight due to its limited number of key players, making Micron Citi’s top pick. This perspective comes after a broader sell-off in the tech sector caused by weak economic reports and unexpected changes in global currency markets.
The recent fall in chip stocks is linked to several issues, such as a disappointing July jobs report and an unexpected rate increase by the Bank of Japan, which altered currency trading strategies. Additionally, poor earnings from major semiconductor companies like Intel and NXP Semiconductors have worsened the sector’s decline. The VanEck Semiconductor ETF has dropped by 21% in the past month, reflecting wider investor concerns. Danely notes that semiconductor stock valuations had reached a 70% premium over the S&P 500, the highest since 2008, driven by overly optimistic expectations now correcting.
Despite the current market swings, Danely remains hopeful about the sector’s future, pointing to ongoing growth in AI and memory markets. He recommends investing in Micron, as well as Advanced Micro Devices, Nvidia, and Analog Devices, due to their strong fundamentals. Danely notes that while earnings forecasts for 2025 have been revised downward, increased investments in AI and better-than-expected DRAM pricing for Q3 2024 suggest the semiconductor sector is resilient and set for recovery.
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