Citi analysts are approaching the first-quarter earnings season for semiconductor stocks with a mix of caution and optimism, but they’ve honed in on two specific companies that stand out: Advanced Micro Devices (AMD) and Analog Devices. The investment bank has assigned 30-day upside catalyst watches for both, indicating a potential for short-term growth as they prepare for their upcoming earnings reports.
Despite maintaining a Neutral rating on AMD, Citi has revised its price target downward to $248, down from $260. The analysts have shifted to a sum-of-the-parts valuation model, which breaks down AMD’s business segments for CPUs and GPUs separately. This reflects a strategic assessment of AMD’s growth areas, especially as it capitalizes on the increasing demand for server CPUs.
In fact, AMD’s presence in the server CPU market has been gaining momentum. The company’s market share rose to an impressive 41.3% in Q4 2025, an increase from 39% in the previous quarter, while Intel’s share has dwindled significantly from 89.2% in early 2021 to 58.7%. This trend is bolstered by the rising demand for AI technologies, further driving AMD’s sales.
In light of this, Citi has slightly adjusted its 2026 earnings per share estimate for AMD to $6.38, up from $6.34, attributing this projection to increased CPU sales connected to the burgeoning agentic AI sector. Both AMD and Intel have also informed clients of planned CPU price hikes, set to take effect in March and April, a move that could enhance profit margins.
As for AMD’s outlook, while the company anticipates the second half of 2026 might underperform seasonal expectations, it remains optimistic about its client business continuing to grow, specifically within premium market segments. Citi analysts suggest there is reason for optimism heading into earnings, given AMD’s pricing leverage and continued market share expansion.
On the other hand, Citi holds a Buy rating for Analog Devices, establishing a price target of $400, driven in part by anticipated price increases in the analog chip sector. Importantly, both Analog Devices and Texas Instruments plan to implement price hikes ranging from 10% to 15% as they respond to rising input costs. Citi’s estimates for Analog Devices are already surpassing market consensus for the upcoming April and July quarters, further solidifying its bullish stance.
The data center sector, which contributes a substantial 34% of total semiconductor demand, is also under the spotlight. Citi projects that capital expenditures from the largest U.S. cloud providers will surge by 69% in 2026, building on a remarkable 79% increase in 2025. The investment bank anticipates the addressable market for data center semiconductors will grow to an impressive $731 billion by 2028.
Citi has expressed an even more favorable outlook for CPU demand overall, as technological shifts towards inference and agentic AI workloads create a need for higher processing capabilities. However, it does foresee challenges in the smartphone sector, projecting a 17% year-over-year drop in unit volumes amidst rising memory prices. Notably, suppliers like Skyworks and Qualcomm could remain more resilient than their peers against these headwinds.
Recent global PMI data from February indicates ongoing strength in the domains of computing and communications equipment, suggesting a sustained investment in AI infrastructure is supporting manufacturing activity.
