Chip stock pullback is buying chance, Citi says; data centers to exceed total chip market by 2030

The semiconductor sector is experiencing a temporary pullback amid macro headwinds—rising oil and bond yields paired with uncertainty about AI capital spending—yet Citi's analysis reveals structural strength underneath. Data centers have become the sector's anchor, now representing 34% of total demand and positioned to surpass the entire semiconductor market by 2030, a milestone that underscores the AI infrastructure buildout's scale. This shift is reflected in recent earnings revisions: consensus revenue estimates for 2026 and 2027 among reporting companies rose 4% and 7% respectively, while earnings-per-share estimates climbed 7% and 8%, signaling that street sentiment is stabilizing despite the near-term volatility.

The real driver of Citi's optimism, however, is the surge in capital intensity across the supply chain. Intel, TSMC, and Tesla have all raised capex guidance significantly—Intel to more than $20 billion for 2026 (a $2 billion lift), TSMC to $60–64 billion (a $4–8 billion increase) plus an extraordinary $100 billion Arizona commitment, and Tesla committing to exceed $25 billion in 2026 with further growth planned. These outlays are not speculative; they reflect actual demand signals from AI and U.S. onshoring policy. Citi's recommendation to favor equipment makers over chip stocks themselves is grounded in this capex acceleration: as chipmakers spend more on tools and fabs, the equipment suppliers capture margin expansion and visibility that chip stocks may not yet reflect. Amkor's $1.5 billion partnership with Nvidia to expand advanced packaging capacity, backed by Nvidia's prepayment, further validates the sector's buildout momentum.