The Philadelphia Semiconductor Index ($SOX) hit an all-time high of 13,998.14 on June 3, then quickly dropped 9.58% in one session, its sharpest fall in a while. The selloff followed Broadcom's (AVGO) Q2 earnings report. Even though revenue jumped 48% year-over-year (YoY) to $22.2 billion, investors were not impressed.
The market wanted stronger AI guidance and more big customer wins. Because Broadcom is seen as a key signal for the chip sector, its cautious tone dragged the rest of the space lower, including Nvidia (NVDA), Advanced Micro Devices (AMD), Micron Technology (MU), Arm Holdings (ARM), and Marvell Technology (MRVL). Even after the drop, the SOX is still up 78% this year, though some had already warned that chip stocks were getting stretched.
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For investors trying to make sense of the pullback, Citigroup stepped in with a clear take: this looks like a healthy reset, not the start of a deeper decline. The firm pointed to three names as attractive right now: Broadcom, Texas Instruments (TXN), and Applied Materials (AMAT). These are not niche plays. They are among the largest and most followed companies in the space, each covering a different part of the semiconductor chain, from AI chips and analog components to the equipment used to manufacture them.
So with Citigroup making its case and the SOX coming off its worst week since early June, are these stocks now good entry points, or is this just another case of Wall Street backing names it already likes? Let’s find out.
Bullish Semiconductor Stocks #1: Broadcom (AVGO)
Broadcom is a chip and software company with a wide reach. It makes custom AI chips, networking parts, and components used in phones and broadband while also running a growing infrastructure software business.
Despite the recent dip in semiconductor stocks, AVGO stock is still up 49% over the past 52 weeks and 10% year-to-date (YTD), showing it has held up better than many peers.
www.barchart.com AVGO stock is not cheap. It trades at about 39.733 forward earnings, above the sector average of 25.09x, which suggests investors expect stronger growth. It also pays a dividend of $2.48 per share, with a 0.63% yield and a 35.03% payout ratio. The company pays quarterly and has increased its dividend for 16 straight years, though the yield is still below the tech sector average of 1.37%.
Revenue for the second quarter of fiscal 2026 came in at $22.19 billion, up 48% year-over-year (YoY), with non-GAAP EPS of $2.44 and free cash flow of $10.26 billion. Looking ahead, Broadcom expects about $29.4 billion in revenue next quarter, which would be an 84% jump, with margins staying very high.
On the business side, Broadcom is pushing deeper into AI. It teamed up with Apollo Global Management (APO) and Blackstone (BX) to launch a $35 billion platform aimed at building AI infrastructure, with plans to support over 20 gigawatts of compute capacity through 2028. It is also investing more in software security through its Tanzu unit to help companies deal with rising AI-driven threats.
The 42 analysts covering AVGO stock rate it a consensus “Strong Buy,” and the average price target of $514.45 suggests about 37% upside from current levels.
www.barchart.com Bullish Semiconductor Stocks #2: Texas Instruments Incorporated (TXN)
Texas Instruments Incorporated (TXN) makes everyday chips that go into cars, industrial machines, electronics, and communication systems. It focuses on analog and embedded chips, which are used almost everywhere and tend to bring steady demand over time.
The stock has been on a strong run, up 45% over the past 52 weeks and 67% YTD.
www.barchart.com TXN stock trades at about 37.66x forward earnings, above the sector average of 25.09x, meaning investors are paying a premium for its stability and margins. It also stands out for income, with an annual dividend of $5.62 per share, a 1.95% yield, and a high 94.15% payout ratio. The company pays quarterly and has raised its dividend for 22 straight years, well above the tech sector average yield of 1.37%.
First-quarter 2026 revenue came in at $4.83 billion, up 18.6% YoY and ahead of expectations. GAAP EPS was $1.68, while adjusted EBITDA reached $2.46 billion. Margins improved, with the operating margin rising to 37.5%, and free cash flow recovered to $1.40 billion from a loss a year ago. Guidance for the next quarter also came in above estimates, with revenue around $5.2 billion and EPS at $1.91.
On the product side, Texas Instruments is expanding into growing markets. It launched a new battery monitor for electric vehicles and energy storage that can better detect issues and improve battery life while lowering system cost. It also released the TI-84 Evo calculator, updating a long-standing product line that still sees steady demand.
Among 35 analysts, TXN stock has a consensus “Moderate Buy” rating, and the average price target of $290.21 suggests just 0.5% upside from current levels.
www.barchart.com Bullish Semiconductor Stocks #3: Applied Materials (AMAT)
Applied Materials makes the equipment that chip companies use to produce semiconductors and displays. Instead of selling chips directly, it sells the tools needed to manufacture them, which puts it right at the center of global chip production.
Even after the recent pullback, AMAT stock is up 209% over the past 52 weeks and 107% YTD.
www.barchart.com AMAT stock trades at about 41.53x forward earnings, well above the sector average of 25.09x, meaning investors are paying up for its growth and position in advanced chipmaking. Its dividend is small but consistent, with an annual payout of $1.91 per share, a 0.38% yield, and a low 18.51% payout ratio. It pays quarterly and has increased dividends for nine straight years, though the yield is below the tech sector average of 1.37%.
Applied Materials reported record revenue of $7.91 billion for the second quarter of fiscal 2026, up 11% YoY. GAAP EPS hit a record $3.51, while non-GAAP EPS rose to $2.86. Margins remained strong, and the company generated $845 million in operating cash flow, returning $765 million to shareholders through buybacks and dividends.
The company is also investing to stay ahead. It expanded its Singapore operations with a $500 million investment, more than doubling cleanroom capacity to meet rising AI-related demand. It also partnered with SCREEN Semiconductor Solutions to improve wafer cleaning technology, which is becoming more important as chips get more complex.
The 38 analysts covered by Barchart rate AMAT stock a consensus “Strong Buy,” but the average price target of $514.09 has already been surpassed.
www.barchart.com Conclusion
Citi’s call essentially frames this pullback as a reset rather than a reversal, and the fundamentals across these names still point to strong underlying demand, especially from AI and industrial markets. Broadcom and Applied Materials look best positioned to ride continued AI infrastructure spending, while Texas Instruments offers a steadier, income-backed angle. Most likely, shares move higher from here, though probably with more volatility than earlier in the year as valuations remain elevated. The easy gains may be behind, but the broader trend still leans upward if earnings momentum holds.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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