Investing.com -- Citi analysts believe the recent downturn in semiconductor stocks is nearing its end and now it is "almost time to buy again," citing the promising outlook for 2025.
"We believe the downside/sell-off is almost over and attention will shift to 2025, stated the bank.
In its earnings recap, Citi highlighted that consensus earnings per share (EPS) estimates for semiconductor companies fell 11% during third-quarter results, driven largely by downside from Microchip (NASDAQ:MCHP), NXP Semiconductors (NASDAQ:NXPI), and Intel (NASDAQ:INTC).
The decline, along with the 9% drop in the SOX index, represents the brunt of anticipated downside, according to Citi.
Looking ahead, Citi expects global semiconductor sales to increase by 9% year-over-year in 2025, following a robust 17% growth this year.
They state that key drivers of the sector's growth include the stabilization of industrial markets and the likely conclusion of a correction in the automotive end market by the first half of 2025.
Citi remains confident that "the other 75% of semi demand appears to be solid," making it an opportune moment for investors to consider building positions in semiconductor stocks, with recommendations to be aggressive heading into Q1 2025.
The bank's buy-rated stocks include Advanced Micro Devices (NASDAQ:AMD), Broadcom (NASDAQ:AVGO), Nvidia (NASDAQ:NVDA), Texas Instruments (NASDAQ:TXN), and Micron Technology (NASDAQ:MU).
Citi also highlighted the continued strength in artificial intelligence (AI) as a positive catalyst, noting that combined 2024 AI spending by major players like Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), Meta (NASDAQ:META), and Amazon (NASDAQ:AMZN) increased by roughly $11 billion.
This is favorable for stocks with significant AI exposure, such as AMD, Nvidia, Micron, Marvell (NASDAQ:MRVL), and Broadcom. In addition, Apple (NASDAQ:AAPL)'s stronger-than-expected iPhone sales were seen as a positive signal for Broadcom, which derives 15% of its sales from Apple.
For investors, Citi says investors should "pick away" at analog semiconductor names as 2025 approaches, signaling confidence in a recovery on the horizon.