Micron Technology (NASDAQ:MU) and Broadcom (NASDAQ:AVGO) are still Citi’s top AI-linked semiconductor picks, even as chip sales stumbled in January. The sector pulled in $50.8 billion, down 14% month-over-monthworse than the typical 9.1% seasonal dip. The drag came from weaker memory and microcontroller sales, but Citi isn’t backing down. AI now makes up around 20% of semiconductor demand, and Citi expects inventory replenishment in the analog space to fuel a 13% rebound in 2025. Texas Instruments, Microchip, Analog Devices, and NXP Semiconductors are also in the spotlight as potential winners.
Broadcom, a quiet giant handling 99% of all internet traffic, is cashing in on AI’s explosion. In its latest quarter, AI-driven revenue soared 77% to over $4 billion, while infrastructure software jumped 47%pushing total sales to a record $15 billion. Cloud providers are loading up on Broadcom’s connectivity tech and XPUs to accelerate AI workloads, and the company is already shipping samples of its next-gen Tomahawk switch. Looking ahead, Broadcom’s three largest cloud customers alone represent a $6090 billion opportunity by 2027. And that doesn’t even count the four additional cloud players knocking on its door for custom AI accelerators. Despite a 26% dip since late January, Broadcom’s stock trades at 28 times forward earningsfar below its 37-times multiple earlier this year.
For investors, this setup is hard to ignore. AI demand isn’t slowing down, and the semiconductor sector is primed for a major rebound next year. Micron, Broadcom, and leading analog chipmakers are sitting in the driver’s seat as AI weaves deeper into cloud computing, enterprise applications, and next-gen data centers. The short-term volatility? Just noise. The real story is unfolding over the next decadeand these names are at the center of it.
This article first appeared on GuruFocus.