Karishma Vanjani
Semiconductor stocks have lost some steam lately, but Citi Research analysts expect a good run in 2025.
The iShares Semiconductor exchange-traded fund -- the SOXX -- is up 18% in 2024, while the broader market has surged 26%. The ETF has fallen 13% from its July peak of $259, making last year's 67% gain look increasingly unlikely to repeat.
Doubts about growth in profits have dragged on semiconductor stocks. The consensus forecast for aggregate earnings per share in 2025 declined 11% during the third-quarter earnings season, mostly led by lower forecasts for NXP Semiconductors, Microchip Technology, and Intel, Christopher Danely and his team from Citi say. The consensus call on aggregate sales declined 4%.
"However, we believe the downside/sell-off is almost over and attention will shift to 2025," Danely wrote. He estimates global semiconductor sales will rise 9% in 2025 compared with 2024, following estimated growth of 17% in 2024.
One reason for the analysts' optimism is their expectation that America's technology stars -- Alphabet's Google, Microsoft, Meta Platforms, and Amazon.com -- will keep spending heavily on data centers. Citi foresees spending of more than $233.4 billion in 2025, up 40% from an expected $166.6 billion this year, based on commentary from some companies.
"We believe this is good for AI stocks such as Advanced Micro Devices, Nvidia, Micron Technology, Marvell Technology and Broadcom," he said.
Danely also rates Analog Devices, Microchip Technology, Texas Instruments, and KLA at Buy. "The worst is just about over. Almost time to buy again," Danely titled his note.
Write to Karishma Vanjani at karishma.vanjani@dowjones.com.
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(END) Dow Jones Newswires
November 12, 2024 09:15 ET (14:15 GMT)
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