US semiconductor stocks have “plenty of room to go” from a margin, revenue, inventory and demand perspective, Citi analysts wrote in a note to clients on Friday.
They said while valuation appears to be extreme, it can be explained by artificial intelligence (AI), which is resulting in accelerating growth via higher pricing in semiconductors for the first time in 25 years.
“AI has gone from nothing to over 25% of overall semiconductor sales in only five years," the analysts wrote.
Citi’s top pick in the space remains Microchip Technology Inc (NASDAQ:MCHP), while their other 'Buy’ rated names include Broadcom Inc (NASDAQ:AVGO, ETR:1YD), Analog Devices, Micron Technology, NXP Semiconductors, and Texas Instruments.