Citigroup is optimistic about the performance of these two chip stocks in their first-quarter earnings reports.

Investing.com - Citigroup analysts maintained an overall cautious outlook as the first-quarter semiconductor earnings season gets underway, but focused on upside catalysts for two stocks—AMD and Analog Devices.

Meanwhile, the firm kept Broadcom, Nvidia, Texas Instruments, and Monolithic Power Systems as its overall top picks.

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Citigroup expects earnings season across the sector to be mixed, with a favorable view of data-center chip manufacturers benefiting from artificial intelligence and general server demand, followed by analog semiconductors, due to lower inventory levels and profit margins that are being squeezed. The Wall Street firm is most cautious about smartphone chip suppliers, expecting steadily rising memory costs to put pressure on unit demand for lower-end products.

For U.S. company AMD, Citigroup maintains a Neutral rating, but reduced its price target from $260 to $248, shifting to a sum-of-the-parts valuation framework to assess the company’s CPU and GPU business separately.

The analyst team led by Atif Malik slightly raised its 2026 earnings per share (EPS) forecast from $6.34 to $6.38, citing increased CPU sales tied to proxy-style artificial intelligence demand.

They believe there is room for upside in market expectations before the earnings release, noting that “Intel and AMD have both informed customers that they plan to increase pricing across their CPU product lines, with the price hikes beginning in March and April.”

AMD continues to gain server CPU market share, reaching a 41.3% revenue share in the fourth quarter of 2025, up from 39% in the prior quarter, while Intel’s share has fallen from 89.2% at the start of 2021 to 58.7%.

“While AMD expects potential seasonal weakness in the second half of 2026, it still believes AMD’s client business can grow, driven by share gains and continued focus on the high-end market,” the analysts wrote.

For Analog Devices, Citigroup gives a Buy rating with a $400 price target, with catalysts driven by expectations of higher pricing in the analog chip market.

Supply-chain discussions at the most recent industry conference showed that both Texas Instruments and Analog Devices have raised analog chip prices by 10% to 15% due to higher input costs, while Citigroup’s expectations for Analog Devices’ April and July quarters are already above market consensus.

From a broader perspective, the data-center segment accounts for 34% of semiconductor demand, and remains the strongest end market, supported by spending on artificial-intelligence infrastructure.

Citigroup expects capital expenditures among the top five U.S. cloud service providers to grow 69% in 2026, following 79% growth in 2025, and projects that by 2028 the total addressable market for data-center semiconductors will reach $731 billion.

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