Citi Recommends Nvidia (NVDA) and Broadcom (AVGO) Stock Following Chip Sector Decline

Key Takeaways

• Investment analysts at Citi view the recent semiconductor sector decline as an opportunity to accumulate shares, arguing concerns about AI capital expenditure are exaggerated
• Leadership at both Nvidia and Broadcom have dismissed worries about industry deceleration, with Broadcom projecting AI chip sales of $115 billion by its 2027 fiscal year
• Anthropic’s chief executive Dario Amodei advocated for coordinated international deceleration of AI advancement, receiving endorsements from Sam Altman and Elon Musk
• Major indices closed lower Monday with the Dow declining 152 points, the S&P 500 falling 37 points, and the Nasdaq dropping 146 points
• Crude oil prices climbed to $101.39 per barrel, marking the ninth advance in ten trading days and intensifying inflation worries alongside interest rate expectations

American equity markets retreated on Monday following proposals to decelerate artificial intelligence development that unsettled chip manufacturing stocks, though Citi recommended investors view the decline as a purchase opportunity.

The Dow Jones Industrial Average decreased 152.09 points, representing a 0.29% decline, finishing at 52,421.20. The S&P 500 shed 37 points, down 0.48%, settling at 7,619.98. The Nasdaq Composite retreated 146.62 points, losing 0.56%, to end at 26,186.41.

E-Mini S&P 500 Sep 26(ES=F)

Market Decline Catalysts

The chief executive of Anthropic, Dario Amodei, advocated for coordinated international deceleration of AI model advancement, responding to concerns raised by a former employee whistleblower regarding potential dangers of unregulated artificial intelligence progress.

Support for this position came from OpenAI’s Sam Altman and SpaceX leader Elon Musk. In response, Microsoft released a preliminary framework governing AI model development practices. Microsoft equity advanced 2% to reach $505.41.

The semiconductor sector experienced the most significant pressure. Should prominent AI research organizations reduce development velocity, infrastructure requirements for data centers might diminish, potentially affecting chip demand and valuations.

Nvidia shares declined 3.4% to settle at $210.96. The PHLX Semiconductor index tumbled 5.9%. Corning, a manufacturer of fiber-optic components for data infrastructure, plummeted 14% to $143.60.

Investment Bank Identifies Purchase Opportunity

In a Tuesday research note, Citi analysts maintained that anxiety over reduced AI capital spending appears excessive. The firm referenced statements from Nvidia and Broadcom executives who rejected the slowdown hypothesis.

Broadcom’s chief executive Hock Tan reinforced the company’s projection of $115 billion in artificial intelligence chip revenue by fiscal year 2027.

Citi emphasized that the strategic significance of artificial intelligence superiority, particularly considering technology rivalry between the United States and China, reduces the likelihood of substantial reduction in AI capital allocation. The bank highlighted President Trump’s assertions regarding maintaining American technological advantages over China.

Citi maintains Buy recommendations on both Nvidia and Broadcom securities. The firm’s price objective for Nvidia stands at $315, while Broadcom’s target is $515.

The investment bank suggested that decelerating implementation timelines might actually benefit equity valuations. More measured AI infrastructure expansion could sustain extended capital investment cycles, according to Citi’s analysis.

Crude oil contracts also pressured markets Monday, advancing $1.34 to reach $101.39 per barrel. This represented the ninth increase across ten sessions, with petroleum up 18% throughout September. Saudi Arabia suspended operations on a critical pipeline, while Houthi forces strengthened their position over the Bab al-Mandeb strait.

The 10-year Treasury yield momentarily exceeded 5% during trading, reaching its peak level since July 2007. Fed funds futures markets indicate a 95% probability of a rate increase when the Federal Reserve convenes Wednesday.

Federal Reserve Chairman Kevin Warsh is anticipated to elevate rates to a range between 3.75% and 4%.

Bank of America stock declined 5.1% to $59.47 following executive warnings that investment banking revenue might contract during the current quarter.

The post Citi Recommends Nvidia (NVDA) and Broadcom (AVGO) Stock Following Chip Sector Decline appeared first on Blockonomi.