Key Takeaways
AI demand is fueling a broad-based recovery in semiconductors across data centers, networking and automotive end markets, offsetting persistent cyclical weakness in other segments, according to analysts at Citigroup's Pan-Asia Conference 2026 held in Singapore last week.
"AI demand is propelling a recovery in semiconductors across data centers, networks and the automotive sector, offsetting cyclical weakness," Citi analysts said in a note summarizing takeaways from the conference, which drew 10 Mainland Chinese and Hong Kong technology companies.
Data center hardware demand is growing strongly, with suppliers expanding capacity for high-margin products, the note said. On the software side, AI and IT services are shifting toward scalable token-based monetization models to enhance margins. Citi also flagged that demand for AI edge devices is gaining growth momentum, benefiting leading vendors, while visibility for AI smart glasses equipped with displays is improving.
The conference also highlighted that upcoming foldable smartphones will drive major hardware specification upgrades, and that for the iOS supply chain, memory and foreign-exchange headwinds remain manageable — though pressure has been noted since the second quarter.
Citi's Buy-rated picks
Citi assigned Buy ratings to five companies across the semiconductor and optical supply chain. ASMPT (00522.HK), a semiconductor equipment and materials firm, was among the picks. LUXSHARE PRECISION (002475.SZ), a Chinese electronics manufacturing services provider, and LENS (06613.HK), an optical component maker, also received Buy ratings. OMNIVISION (603501.SH), a fabless semiconductor company specializing in image sensors, and CONANT OPTICAL (02276.HK), a lens manufacturer, rounded out the list.
The bullish call on ASMPT comes as the company benefits from advanced packaging demand tied to AI chip production. ASMPT shares rose 10.8% on Monday, with short-selling volume at 16.7% of turnover, according to exchange data. LENS shares gained 1.8%, while CONANT OPTICAL added 1.6%.
Investment implications
The Citi note reinforces a view that AI infrastructure spending — which has driven outsized gains for Nvidia Corp. and TSMC — is now broadening into adjacent semiconductor segments. Lattice Semiconductor Corp., which reported first-quarter earnings last week, said server revenue now accounts for 38% of total revenue, up from the low teens in prior years, and that AI is expected to represent about 25% of total revenue by 2026. The company's revenue grew 42% year-over-year to $170.9 million, with EPS up 86%.
For investors, the key question is whether the AI-driven recovery in non-GPU semiconductor segments can sustain momentum as hyperscaler CapEx continues to ramp. Citi's Buy ratings on ASMPT and OMNIVISION suggest confidence that equipment makers and sensor suppliers will capture a growing share of the AI buildout. ASMPT trades at a premium to historical multiples, reflecting the market's pricing of advanced packaging tailwinds, while OMNIVISION's position in automotive image sensors offers exposure to the AI-in-autos theme Citi highlighted.
This article is for informational purposes only and does not constitute investment advice.
