Citi bullish on US semiconductor gear shares

Investing.com — Citi upgraded a number of semiconductor gear shares, together with Nova, Veeco Devices Inc (NASDAQ:VECO), MKS Devices Inc (NASDAQ:MKSI), Superior Vitality Industries Inc (NASDAQ:AEIS), and FormFactor Inc (NASDAQ:FORM) given engaging risk-reward dynamics regardless of an anticipated 5% decline in wafer fabrication gear spending in 2025.

The sector has confronted a pointy 30% plus correction within the second half of 2024, pushed by weaker client reminiscence demand and decrease spending in China. Nevertheless, Citi highlighted tailwinds from ongoing AI-related investments and a possible rebound in reminiscence pricing and estimates by the primary half of 2025 as key catalysts.

The upgrades align with Citi’s “Section 1 cyclical stock-picking framework” and its US technique crew’s obese suggestion for semiconductors and semiconductor gear. The sector at present trades at traditionally engaging valuations, with reductions of 39% to the Philadelphia Semiconductor Index and 18% to the S&P 500.

For big-cap names, Citi favours KLA over friends Utilized Supplies (NASDAQ:AMAT) and Lam Analysis (NASDAQ:LRCX) attributable to stronger publicity to modern foundry and logic gross sales and a derisked outlook for China spending.

Within the small- and mid-cap house, Citi highlighted Nova for its broad metrology portfolio, Veeco for share good points in laser and annealing markets, and Teradyne (NASDAQ:TER) for alternatives in customized compute.

Citi cautioned that dangers stay, together with geopolitical tensions, macroeconomic weak spot, and overdependence on AI server demand, however believes the sector’s correction has largely priced within the negatives.