Citi Tells Investors to Buy the Dip in Memory and Chip Stocks

TLDR

• Citi says the AI memory upcycle is still in early stages and could outperform the 2001-2007 NAND cycle
• Micron, Samsung, and SK Hynix are all down more than 20% from recent highs
• Citi is buying AMD, Texas Instruments, and Applied Materials on the pullback
• High-bandwidth memory shortages are expected to push AI chipmakers toward deploying more GPUs per system
• Big Five cloud provider capex is forecast to grow 90% in 2026, supporting chip demand

---

Memory stocks have taken a hard hit recently. Micron, Samsung, and SK Hynix are all down more than 20% from their recent peaks.

Micron Technology, Inc., MU

The selloff came after a strong run, driven by concerns over high valuations and AI spending. But Citi strategists say the drop is a buying opportunity, not a warning sign.

Citi argues the current AI-driven memory upcycle is still in its early innings. They compare it to the 2001 to 2007 NAND cycle, when new devices like MP3 players and digital cameras created fresh demand.

This time, AI is driving demand for both DRAM and NAND at the same time. Citi says that makes the current cycle likely to outperform the earlier one.

One sign the cycle has legs is that customers are signing three- to five-year long-term agreements. That kind of commitment points to sustained demand, not a short-term burst.

High-Bandwidth Memory Shortage Reshaping AI Infrastructure

There is also a persistent shortage in high-bandwidth memory chips. Citi expects this to push AI chipmakers to shift from using fewer, more powerful chips to deploying larger numbers of GPUs with less memory per unit.

Even with less memory per GPU, Citi projects total HBM capacity per AI system will rise 434%, from around 20 terabytes to over 110 terabytes, as GPU counts per system grow from 72 to 576.

SK Hynix mentioned during its second-quarter earnings call that it is reviewing shareholder return options. Citi expects the company to announce a program before its third-quarter results, and has kept its Buy rating with a price target of 3,100,000 won.

Citi Also Backs AMD, Texas Instruments, and Applied Materials

Outside of memory, Citi is buying three chip stocks on the pullback: AMD, Texas Instruments, and Applied Materials.

The Philadelphia Semiconductor Index is up nearly 60% year to date but has fallen 21% in the current quarter. Citi says stocks ran into high investor expectations.

Data center demand remains strong, making up 34% of the semiconductor market. Industrial demand is growing 30 to 35% year over year, and automotive is up 12 to 15%.

Some analog chip products now have lead times beyond 16 weeks. Customer escalations have doubled, pointing to tight supply.

Citi raised its 2026 and 2027 capex growth outlook for the Big Five cloud providers to 90% and 46% respectively. Alphabet raised its 2026 capex guidance to between $195 billion and $205 billion. Amazon lifted its target to $220 billion.

Citi calls this backdrop supportive of chip stocks and remains a buyer of AMD as its top pick, citing GPU and CPU market share gains. Applied Materials gets a positive catalyst watch ahead of its August 13 earnings report.