Will the chip stocks that lead the US stock market into a bull market soon see a new round of "crazy bull market surge"?

Research team from Citigroup on Wall Street stated in a report on Tuesday that although a few chip stocks that benefited from the AI boom, such as Taiwan Semiconductor Manufacturing Co., Ltd. Sponsored ADR (TSM.US) and NVIDIA Corporation (NVDA.US), performed strongly during the third quarter earnings season for US stocks, the overall chip sector in the US experienced an exaggerated wave of selling due to low non-AI demand. According to the Citigroup research team, it seems that market funds are approaching a good time to buy chip stocks once again, indicating that one of the core DRIVES that led the US stock market into a bull market since 2023 - chip stocks - are expected to regain global fund favor after being sold off during the earnings season, possibly once again initiating a "bullish" super rally and becoming a key player in the US stock market. The team, led by Citigroup analyst Christopher Danley, wrote in a report to clients, "During the chip company earnings season, consensus expectations dropped by about 11%, and the Philadelphia Semiconductor Index fell by nearly 10%, primarily due to weak demand for analog chips and microchips, leading to significant declines in stocks such as Microchip Technology Incorporated (MCHP.US), NXP Semiconductors NV (NXPI.US), and Intel Corporation (INTC.US)." "However, we believe this irrational decline/sale is nearly over, and attention will gradually shift to 2025. We expect that global semiconductor market sales will increase by about 9% in 2025, with a potential 17% year-on-year growth expected in 2024 after a relatively weak year." Citigroup added in the report. The Citigroup research team, led by Christopher Danley, believes that the long-term downward trend in demand for industrial endpoint chips, currently the weakest segmented area of the chip sector, should soon disappear, and expects the inventory adjustment in the long-term weak market of the automotive sector to conclude in the first half of 2025. "On the contrary, the chip market in other segmented areas such as PCs, smartphones, and data center servers, accounting for the remaining 75% of chip market demand, continues to show 'steady growth'. Investors should now establish positions in chip industry stocks and 'transition to a more aggressive configuration exposure in the first quarter of 2025', partly due to the hefty AI-related spending by mega-cap tech companies like Amazon.com, Inc., Alphabet Inc. Class C, and Microsoft Corporation." The Citigroup research team further stated. In this research report, the Citigroup research team continues to maintain a "buy" rating for AMD (AMD.US), Analog Devices, Inc. (ADI.US), Broadcom Inc. (AVGO.US), Micron Technology, Inc. (MU.US), Microchip Technology Incorporated (MCHP.US), Texas Instruments Incorporated (TXN.US), NVIDIA Corporation (NVDA.US), and KLA Corporation (KLAC.US). AI chips and storage chips prop up the "half of the semiconductor market" Currently, the demand for data center server AI chips and storage chips is very strong and likely to remain so for a long time to come. The latest statistical data published by the Semiconductor Industry Association (SIA) shows that due to the strong demand for data center server AI chips such as NVIDIA Corporation's H100/H200, the global semiconductor market sales in the third quarter of 2024 reached 1660 billion US dollars, a year-on-year increase of 23.2% compared to the same period in 2023, and a quarter-on-quarter growth of 10.7% compared to the already strong sales in the second quarter of 2024. The global semiconductor market sales in September 2024 were approximately 553 billion US dollars, a 4.1% month-on-month increase compared to the semiconductor market sales of 531 billion US dollars in August 2024. For the outlook of the semiconductor market demand in 2025, according to Gartner's latest forecast, the global semiconductor market is expected to reach approximately $717 billion in overall sales in 2025, a 14% increase compared to 2024. This growth is mainly driven by the recovery of demand for data center AI-related semiconductor and consumer electronics products with AI integrated on the edge. Gartner predicts that global semiconductor market sales this year could reach $630 billion, indicating a significant increase of 18.8% compared to the previous year. Gartner predicts that the storage chip market will show the strongest performance in 2025, with an expected growth of 20.5% and sales expected to reach $196.3 billion, with enterprise NAND flash and DRAM being the main DRIVERS. The World Semiconductor Trade Statistics Organization (WSTS) released its spring outlook data for the semiconductor industry, predicting a very strong recovery trend in the global semiconductor market in 2024. WSTS has significantly raised its forecast for the size of the global semiconductor market sales for 2024 compared to the end of 2023. For 2024, WSTS predicts a market size of $611 billion, which means a substantial increase of 16% compared to the previous year, a significant upward revision from their forecast at the end of 2023. Looking ahead to 2025, WSTS forecasts that the global semiconductor market sales could reach $687 billion, indicating a potential increase as well.It is expected that the already strong recovery trend in 2024 will further increase by about 12.5%. WSTS predicts that this growth will be mainly driven by the storage chip category and artificial intelligence logic category, and it is expected that the overall size of these two categories will soar to over $200 billion in 2025 under the boost of the AI boom. Compared to the previous year, WSTS predicts that the total sales growth of the storage chip category dominated by DRAM and NAND will exceed 25% in 2025, and the total sales growth of the logic chip category, including CPUs and GPUs, is expected to exceed 10%. It is also expected that the growth rates of all other submarkets, including discrete components, optoelectronics, sensors, and analog semiconductors, will reach single digits.WSTS predicts that the market size of analog chips, which occupy a significant portion of the chip market for electric vehicles (EV) and industrial applications, is still sluggish. The market size is expected to contract by 8.7% in 2023 and possibly by 2.7% in 2024. However, WSTS forecasts that the overall market size of analog chips is expected to expand by 6.7% in 2025, indicating that the recovery process for analog chips may slowly begin in 2025. Analog chips play an indispensable role in various key functional modules and systems of electric vehicles, including power management, battery management, sensor interfaces, audio and video processing, and core control systems for electric motors.