Citi has expressed increased optimism towards the semiconductor industry following stronger-than-expected sales data for August. Analog Devices (ADI, Financial) remains Citi's top pick in the sector. Additionally, the investment bank has given "buy" ratings to AMD (AMD), Broadcom (AVGO), Micron Technology (MU), Microchip Technology (MCHP), and Texas Instruments (TXN).
Citi analyst Christopher Danely noted in an investor report that the 2024 semiconductor sales forecast has been revised upward from a 14% year-over-year growth to 17%, reaching $616.6 billion. This optimistic outlook is based on anticipated growth in the third and fourth quarters of 2024 surpassing seasonal trends. Product volumes, excluding discrete devices, are expected to rise by 1%, while average selling prices are anticipated to increase by 18% year-over-year.
August's robust performance was largely driven by DRAM chips, significantly exceeding seasonal trends. The total sales for August reached $56.2 billion, surpassing Danely's forecast of $51.4 billion. Sales grew by 15.4% month-over-month, well above the predicted 5.7% increase and the typical 6.7% seasonal growth. Pricing also excelled past seasonal expectations, with the average selling price for products excluding discrete devices climbing 14.2% month-over-month, outpacing Danely's forecast of 2.7% and the seasonal average growth of 5.7%.
Compared to the same period last year, the average sales price for products excluding discrete devices surged 29%, much higher than the expected 16.1% increase. Danely highlighted a 19% sales drop in 2023, marking the steepest adjustment since 2001. This downturn is anticipated to lead to inventory replenishment, supporting continued growth momentum.
