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Tech Stocks Citi is Most Bullish About in 2024

By Yan Cai

Yan Cai Original

In 2023, the market was full of ups and downs, fortunately the outcome was not as eventful, although most of the time it was very turbulent. However, with the wave of AI sweeping over, the performance of the three major US indices at the end of the year was commendable. After the painful fall in 2022, the mind was at least somewhat soothed in 2023.

The end of 2023 is a moment of reflection and foresight. After experiencing a turbulent journey characterized by violent fluctuations, the market has finally found some solid ground. This stabilization has alleviated the frustration of investors, especially considering the heartbreaking downturn in 2022. The American index - a symbolic thermometer of economic vitality - ended the year with a commendable performance, partly due to the sweeping wave of artificial intelligence technology.

The artificial intelligence revolution has transformative potential and has always been a beacon of hope and a driving force for recovery. Its influence spans across various fields - from healthcare to finance, from customer service to logistics - redefining operational efficiency and customer experience. As a result, companies at the forefront of artificial intelligence innovation have seen a soaring valuation, reflecting the market's demand for forward-looking, technology-savvy enterprises.

However, as we stand at the forefront of 2024, the market's recovery has sparked cautious optimism. While the rise of artificial intelligence has been rapid, leading to index performance recovery, there are signs that the initial enthusiasm may be waning. BCA Research speculates that enthusiasm for generative artificial intelligence may be waning, and generative AI has been one of the outstanding figures in the market rebound of 2023. If this prediction holds true, there may be a need to readjust the valuation of tech stocks and shift to a more conservative investment strategy.

Looking ahead to 2024, the investment landscape may be a complex narrative. The global economy is still affected by the aftershocks of the pandemic and geopolitical tensions, which will be a significant factor. Monetary policy, inflation rates, and supply chain restructuring will continue to impact market dynamics. The Federal Reserve's interest rate decisions will remain a key point of observation, and the economic policies being pursued by major economies such as China and the EU will also be a crucial focus.

In addition, the progress of the technology industry will be closely monitored. The industry's resilience will be tested by regulatory resistance, antitrust issues, and the ubiquitous specter of network threats. At the same time, traditional industries once considered stable cornerstones may need to further embrace digital transformation to maintain relevance and competitive advantage.

While 2023 provided a breathing space for the previous year's downturn, 2024 is full of caution and opportunity. The market may favor those who are prepared, adaptable, and innovative. For discerning investors, the coming year will require keen insight into emerging trends, a strong commitment to due diligence, and a steadfast focus on long-term value creation. The narrative of 2024 is still unwritten, and its chapters will be woven together by economic signals, corporate performance, and the indomitable human spirit that thrives in adversity.

Recently, Yanzhi Finance has launched a series of insightful articles to see how major Wall Street banks view 2024, including macro and industry-specific insights. Today, let's take a look at how Citi views the U.S. information technology industry in 2024.

Citi's research on U.S. stock strategy provides detailed information on the current situation and prospects of the information technology industry, particularly focusing on NYSEARCA: XLK.$The Technology Select Sector SPDR® Fund (XLK.US)$。

Here are some key insights and observations based on the report:

1. Industry Weight: The IT industry is still overweight, indicating a bullish sentiment from Citigroup Research. This suggests that they believe the industry's performance may outperform the market.

2. Subsector Performance: In the IT sector, the software and services subsector is being highlighted for its profitability in sales and earnings. This may be attributed to the growing demand across industries for digital solutions and services.

3. Valuation Concerns:Despite positive growth expectations, the high valuation of this industry is a concern. This may imply a premium on stock pricing, which could limit upside potential or increase the risk of a correction.

4. Semiconductor Subsector:The prospects of the semiconductor industry are mixed. Compared with other industries, the challenge of valuation background is relatively small, but the growth trajectory does not seem to rely on significant inflection points, which may mean that the growth path is more stable but slower.

5. Impact of large technology companies:Apple$Apple (AAPL.US)$1. Microsoft$Microsoft (MSFT.US)$2. Broadcom$Broadcom (AVGO.US)$and other large companies have a significant impact on the overall performance of the IT industry due to their industry weight. Their individual performance can influence the development direction of the industry.

6. Stocks with the most buy ratings: Teradata Corp$Teradata Corp (TDC.US)$and Arista Networks$Arista Networks (ANET.US)$ with Corning Inc$Corning (GLW.US)$stock rankings with high ETR (expected total return) highlight that analysts are bullish on the outlook.

7. Sell-rated stocks.NXP Semiconductors and Skyworks Solutions have negative ETR, indicating that analysts are bearish on these stocks.$NXP Semiconductors (NXPI.US)$Overall, according to Citibank's view, although the IT industry, especially the software and services industry, is bullish, there are also subtle differences, particularly in terms of valuation and the different prospects of sub-industries such as semiconductors. The influence of large-cap tech stocks should not be underestimated, and specific stock recommendations provide a more detailed view of the industry outlook.$Skyworks Solutions (SWKS.US)$Top buy-rated stocks from the S&P 1500, ranked by ETR (expected total return):

NXP Semiconductors (NXPI) and Skyworks Solutions (SWKS) have negative ETR, indicating that analysts are bearish on these stocks.

Overall, according to Citibank's view, although the IT industry, especially the software and services industry, is bullish, there are also subtle differences, particularly in terms of valuation and the different prospects of sub-industries such as semiconductors. The influence of large-cap tech stocks should not be underestimated, and specific stock recommendations provide a more detailed view of the industry outlook.

Teradata Corp. (TDC) - ETR 30%

Arista Networks Inc. (ANET) - ETR 27%

Corning Inc. (GLW) - ETR 22%

Juniper Networks Inc. (JNPR) - ETR 22%

GoDaddy Inc. (GDDY) - ETR 21%

HP Inc. (HPQ) - ETR 19%

Apple Inc. (AAPL) - ETR 17%

VeriSign Inc. (VRSN) - ETR 17%

Microsoft Corporation (MSFT) - ETR 17%

Sell-rated stocks, ranked by ETR: 卖出评级股票，按ETR排名:

NXP Semiconductors N.V. (NXPI) - ETR -33%

Skyworks Solutions Inc. (SWKS) - ETR -23%

Here are supplementary information provided by Yancaibao, along with a brief introduction of the companies mentioned by Citi and the key points the analysts are bullish on:

1. Teradata Corporation (TDC$Teradata Corp (TDC.US)$）

Introduction.Teradata is a company that provides big data analysis and data warehouse solutions. It helps organizations analyze and organize large amounts of data to improve decision-making efficiency.

Key points to consider: Efficient data management and analysis needs are growing, as well as Teradata's strong position in the data warehouse and cloud service fields.

2. Arista Networks Inc. (ANET$Arista Networks (ANET.US)$）

Introduction.Arista Networks is a company that primarily provides high-performance network solutions in the datacenter field.

Key points to consider: ：随着云计算和数据中心的增长，对高效网络设备的需求增加，Arista 在这一领域的技术领先和创新能力。

3、康宁公司（GLW$Corning (GLW.US)$）

Introduction.：康宁是一家专注于玻璃科技、陶瓷科学和光学物理的创新公司，产品广泛应用于显示技术、通信网络等领域。

Key points to consider: ：康宁在特种玻璃和光纤技术方面的领先地位，以及其产品在智能手机、电视和汽车等多个行业的应用。

4、瞻博网络公司（JNPR$Juniper Networks(Delisted) (JNPR.US)$）

Introduction.: Juniper Networks is a provider of network equipment and solutions, specializing in routers, switches, and cybersecurity.

Key points to consider: : The demand for upgrading network infrastructure, as well as the company's strong performance in cybersecurity and cloud computing.

5. GoDaddy, Inc. (GDDY)$GoDaddy (GDDY.US)$）

Introduction.: GoDaddy is a company that provides domain name registration, website hosting, and online marketing services.

Key points to consider: : As more and more businesses move online, the demand for domain names and website services is increasing.

6. HP Inc. (HPQ)$HP Inc (HPQ.US)$）

Introduction.: HP is a global company that provides personal computers, printers, and related services and solutions.

Key points to consider: ：在个人电脑和打印市场中的稳固地位，以及对新技术如3D打印的投资。

7、苹果公司（AAPL$Apple (AAPL.US)$）

Introduction.：苹果是一家全球性的科技公司，以其iPhone、iPad、Mac、Apple Watch和Apple TV等产品著名。

Key points to consider: ：强大的品牌忠诚度、产品创新和生态系统的完整性。

8、威瑞信公司（VRSN$VeriSign (VRSN.US)$）

Introduction.: as verisign is responsible for managing some of the top-level domains in the world, such as .com and .net.

Key points to consider: : as a critical part of the internet infrastructure, it has stable sources of income and a high market share.

9, Microsoft Corporation (MSFT$Microsoft (MSFT.US)$）

Introduction.Microsoft is a global leading software company, known for its Windows operating system, Office productivity software, Azure cloud services, and LinkedIn, among other products and services.

Key points to consider: Leadership position in the cloud computing, productivity software, and operating system markets, as well as continuous innovation and business expansion.

These companies have significant market positions and technological advantages in their respective fields, which is why analysts give them high ratings based on expected total returns (ETR). However, each company has its own specific market dynamics and challenges, so investment decisions should consider broader market and economic factors.

What Yincai Jun (referring to the author) is most bullish about is the wave of the AI and GC (artificial intelligence and global cloud) industry. Similar to Citi's view, Yincai also has a positive outlook on the software services industry, but Yincai prefers industry leaders in core sectors.

Several basic principles:

1. "Stay away from market noise and focus on the fundamentals of the company."

2. When considering investments in the AI and GC field, it is important to have a deep understanding of the potential of these technologies and how they will impact specific industries and companies in the future.

Investors should focus on companies that have strong technological capabilities, clear business models, and robust financial conditions in the AI and global connectivity fields.

In the face of short-term market fluctuations, maintaining a long-term and strategic perspective is crucial.

The net asset value of the portfolio reached a new high this week, exceeding one month. As of December 22, 2023, the portfolio has a return rate of 24.26%.

I still highly recommend investing in growth stocks driven by AIGC, and I will continue to recommend investors to focus on major investment opportunities in the AIGC track. At this stage, embracing the AIGC wave is still the best strategy for the future US stock market. For more details, please refer to our previous articles:

1. 12-18 'Huge Expectations for the US Stock Market in 2024, These Industries Are the Best'

2. 12-15 'It is crucial to pay attention to this trend next year'

3. 12-14 'Personally Bearish, Record-High Returns'

4.12-13 "Burn! The main uptrend is coming"

5.12-11 "The pattern will be reconstructed: AI agents are here, don't say it was not predicted"

6.12-6 "The data is finally cooling down, it's time to rise"

7.12-4 "Unmissable era: meditation, innovation, and the AI wave"

8.12-1 "Historical high, just a step away"

9.11-30 "Double click, exceeding expectations again"

10.11-24 "New high in returns"

11.11-20 "Shocking the entire tech industry, everyone is eating melon on the weekend"

12.11-03 "Long US AI Age Portfolio up 6.5% this week."