Citi Calls Semiconductor Pullback a Buying Opportunity, Citing Resilient AI Demand

The recent downturn in semiconductor stocks is a buying opportunity, according to analysts at Citi, who argue in a note to investors that fears of a slowdown in artificial intelligence-related spending are overdone.

Analyst Thesis

Citi's constructive view is supported by recent management commentary from key industry players. The bank highlighted that executives at both Nvidia and Broadcom have pushed back against concerns of weakening demand, emphasizing that the need for underlying AI infrastructure remains robust.

As evidence, the note cited Broadcom Chief Executive Hock Tan, who recently reaffirmed the company's confidence in reaching its fiscal 2027 AI semiconductor revenue target of $115 billion.

Geopolitical and Market Headwinds

Analysts believe the strategic importance of AI leadership, particularly amid escalating technology competition between the U.S. and China, makes a significant reduction in AI investment unlikely. The firm noted that this perspective has been echoed by political figures who advocate for maintaining a U.S. technological advantage.

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While ongoing debates around AI policy and safety could temper the development pace of the most advanced models, Citi contends that sustained demand for AI inference and persistent supply constraints will continue to support capital investment across the ecosystem.

A Slower Rollout May Be a Positive

Counterintuitively, a less frantic pace of development could benefit chip stocks in the long run. "More gradual deployment of AI infrastructure demand could ultimately prove beneficial for the stocks," Citi wrote in its note.

Based on this analysis, the firm reiterated its positive stance on two of the sector's leaders:

• Nvidia (NVDA): Buy rating with a $315 price target.
• Broadcom (AVGO): Buy rating with a $515 price target.