Citigroup analysts said that last week, they communicated with investors and found that NVIDIA is still the most favored chip stock by investors, followed closely by Broadcom. This is because Broadcom has gained more AI customers such as OpenAI, acquired VMware, while investors are starting to feel a bit tired of NVIDIA
Citigroup analyst Christopher Danely believes that Broadcom is surpassing Nvidia as the new favorite chip stock in investors' minds as a benchmark for artificial intelligence (AI) concepts.
In his latest research report, Danely revealed that he met with investors last week to discuss their favorite and least favorite chip stocks. As expected by Danely, Nvidia with the stock code NVDA remains the most favored chip stock among investors, followed closely by Broadcom with the stock code AVGO.
Danely's report stated:
"From our conversations, it is evident that AVGO seems to be surpassing NVDA as the top holding stock, as AVGO has more AI customers joining (OpenAI and ByteDance) and the blessing of VMware (Note: Broadcom completed the acquisition of VMware last year). We also believe that investors are somewhat tired of NVDA."
On Monday this week, chip stocks rebounded overall, with Nvidia up over 4% intraday and Broadcom up over 2%. However, since entering July, chip stocks have underperformed the broader market, with Nvidia down about 4.4% as of last Friday's close, while Broadcom has fallen about 2% during the same period. Year-to-date, Nvidia still has more than double the increase, with a cumulative increase of about 138% as of last Friday's close since the beginning of the year, while Broadcom has risen nearly 41% year-to-date.
Some comments suggest that increased competition, high valuations, and geopolitical uncertainties have recently been weighing on Nvidia's stock price. Some analysts have stated that with some market tools malfunctioning, there is not much room left for AI to drive stock prices.
Despite the recent poor performance of chip stocks, Danely still "remains very bullish on the semiconductor industry." However, he also mentioned that he is initiating a "negative catalyst observation" on Micron Technology, as unfavorable competitive factors are expected to bring short-term pressure to Micron Technology. His report indicates that Micron is expected to have poor trading conditions next month, as Samsung Electronics' products are expected to receive Nvidia's HBM (High Bandwidth Memory) quality certification in the third quarter of this year.
Last week, Wall Street learned from the supply chain that Samsung Electronics' HBM3E has passed Nvidia's testing. The related article mentioned that Samsung Electronics is using its own 4nm process technology to manufacture logic chips in the HBM4 (sixth generation) products. Currently, Samsung Electronics' 4nm process technology has a yield rate of over 70%