Citi has moved Texas Instruments (NASDAQ:TXN) and Monolithic Power Systems (NASDAQ:MPWR) into its top Buy bucket for analog semiconductor stocks following the most recent earnings season, saying the industry has entered a more favorable portion of its cycle.
In a Monday research note, analyst Atif Malik wrote: "We believe the group is in Phase 2 of our cyclical framework where stocks with product cycles or self-help stories generally outperform the group." The upgrade reflects Citi's assessment that company-level initiatives and product momentum will drive relative outperformance in this stage.
For Texas Instruments, Malik pointed to potential gross margin upside as capital spending eases and the firm shifts greater focus to data-center-related research and development. The analyst framed the margin opportunity as linked to moderating capex combined with an increased investment emphasis on data-center R&D.
Monolithic Power Systems earned a top Buy rating as well. Malik said he expects Monolithic to "outgrow the industry led by enterprise data sales product growth," highlighting the company’s positioning to capture stronger demand tied to enterprise data products.
Citi's bullish stance on the broader analog sector is tied to rapidly growing data-center-related sales. Malik noted that data-center-related sales for analog companies rose 50-70% year over year in 2025, substantially outpacing roughly 6% growth for the combined analog and MCU industry. He argued that as analog companies increase their exposure to the data-center end market, valuations could be supported by a higher share of revenue coming from that end market.
"While the data center exposure is still teens sales exposure of most analog companies, we believe the group could sustain multiple rerating as revenues from the data center end market accelerate to account for more than 25% of sales," the analyst wrote.
Looking forward, Citi projects that analog companies' combined data-center and AI revenue could expand by roughly 70% year over year in 2026. From a cyclical standpoint, the bank's analysis indicates there is additional runway for the analog upturn. Industry revenue in the current cycle sits only modestly above the prior peak and remains below the average expansion observed in past cycles.
Based on that cycle view, Malik expects analog and microcontroller revenue and units "could increase by roughly 30% from current levels and the upturn could last at least another year."
On end-market dynamics, the analyst sees improving trends in industrial demand alongside stabilizing global manufacturing PMIs. By contrast, the automotive segment is expected to be softer, with Citi pointing specifically to a projected decline in China auto production in 2026 as a headwind for that end market.
The combination of company-specific margin levers, product-cycle momentum, and accelerating data-center and AI-related demand underpins Citi's decision to elevate Texas Instruments and Monolithic Power Systems to its top analog semiconductor picks.