The first negative PC data point since the pandemic started, apparent smartphone sales softness, and weak guidance from semiconductor companies have combined to drive a semi sell-off, says Citi analyst Christopher Danely.
But the analyst thinks the smartphone issue is confined to China, and PC demand will pick up in the second half of the year with increasing enterprise demand.
Citi advises investors to "use the weakness" to pick up the firm's top semi picks: Micron (NASDAQ:MU), NXP Semiconductor (NASDAQ:NXPI), ON Semi (NASDAQ: ON), and Texas Instruments (NASDAQ:TXN).
Separately, BofA is out with a note discussing the top five semi investor debates.
Regarding what can improve the sector's sentiment and performance, the firm's investor survey came up with the three most important catalysts for a turnaround: stabilization in well-owned, high-momentum stocks like Nvidia (NASDAQ:NVDA) and AMD (NASDAQ:AMD), the return of the SOX to its historical valuation levels, and interest rate stabilization.
Looking at the playbook for the second half of 2021 into 2022, BofA analyst Vivek Arya thinks the focus will be on "companies with the best growth visibility" among semi equipment names with Applied Materials (NASDAQ:AMAT) a top pick, computing stocks with Nvidia a top pick, auto-exposed stocks like NXP Semi, 5G infrastructure like Marvell (NASDAQ:MRVL), and 5G smartphone names like Qorvo (NASDAQ:QRVO).