Citi stated that semiconductor stocks still have upside potential and investors should buy on dips. Citi's top pick is Microchip Technology (MCHP.US), while the firm also assigns "buy" ratings to Texas Instruments (TXN.US), Broadcom (AVGO.US), Micron Technology (MU.US), Analog Devices (ADI.US), and NXP Semiconductors (NXPI.US).

Citi analyst Christopher Danely commented: "This semiconductor earnings season has been a roller coaster ride. In the first half of earnings season, the Philadelphia Semiconductor Index fell 5% due to disappointing overall performance and expectations declining by 6%. However, the index has rebounded to peak levels thanks to strong performance in the artificial intelligence sector and increasing data showing that the analog industry recovery is still in its early stages. We expect the Philadelphia Semiconductor Index to continue climbing, benefiting from strong earnings performance from AI-related companies like NVIDIA (NVDA.US), Broadcom, and Micron, as well as increasingly positive data from the analog sector."

Danely added that the Philadelphia Semiconductor Index has recovered to peak levels after the sell-off, primarily benefiting from Micron Technology's positive guidance, positive comments from analog chip companies, and optimistic views on AI business from companies like NVIDIA and Broadcom. Despite being dragged down by Intel (INTC.US), with overall industry expectations declining 6%, AI remains a bright spot, with companies like Meta (META.US), Microsoft (MSFT.US), and Google (GOOG.US) expected to increase capital expenditure by $18 billion in 2025.

Danely stated: "We expect AI-related stocks to continue rising, such as Broadcom (31% of sales), Micron (17% of sales), and NVIDIA (89% of sales). The recovery momentum in analog products remains solid and is still in its early stages. Analog companies expect third-quarter 2025 sales to grow an average of 6% quarter-over-quarter, which is largely consistent with seasonal patterns. Although automotive and industrial end markets (collectively accounting for 23% of semiconductor sales) appear to have received some tariff-related boost, we believe the analog market recovery momentum remains strong, driven by low inventory, low margins, and improving demand."