According to Zhitong Finance APP, as the earnings season approaches, JPMorgan believes that the market continues to underestimate the expected/inevitable global demand slowdown driven by U.S. tariff-related dynamics and maintains a selective stance on stocks—favoring its preferred stocks Broadcom (AVGO.US), Marvell Tech (MRVL.US), Analog Devices (ADI.US), KLA (KLAC.US), and Synopsys (SNPS.US), all of which are rated &#34;Overweight.&#34; Among small-cap semiconductor stocks, JPMorgan favors MACOM Technology (MTSI.US) and Astera Labs (ALAB.US), which are related to infrastructure and AI/data center spending, and these are also rated &#34;Overweight.&#34;
JPMorgan expects the first quarter earnings season to initiate a negative earnings revision cycle, with 12-month earnings per share expectations potentially being lowered by 15-25% over the next two to three earnings seasons. The firm believes this will aid in the process of semiconductor industry stock prices hitting bottom. Since tariff concerns surfaced, semiconductor stocks have already fallen by about 25%, and JPMorgan believes there is a possibility of a further decline of 10-15% in the coming months. The firm generally expects companies to deliver results in line with or slightly better than expectations but anticipates that executives will take a more conservative stance on second-quarter guidance while also providing a very cautious tone regarding the fundamentals for the second half of the year. JPMorgan expects that demand in the first half of the year will be somewhat driven before anticipated price increases, which could create potential upside risks to earnings per share in the first half; however, this will only amplify the downside risks of lowering earnings per share expectations in the second half of this year.
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JPMorgan stated that previous tariff trade-related dynamics led to widespread and potentially significant demand destruction (declines in industrial production, declines in automotive production, and more conservative customer purchasing patterns). Additionally, rapidly changing tariff news has negatively impacted consumer and business confidence. The firm believes that the prevalent uncertainty is leading to reduced visibility for businesses, especially when turnover business accounts for about 20-30% of their revenue guidance. Recently, China announced tariffs on semiconductors manufactured in the U.S., which will affect companies with significant manufacturing operations in the U.S., but JPMorgan expects these companies to flexibly adjust their supply chain networks to help mitigate some of the impacts.
JPMorgan analyzed the patterns and outcomes of the 2018 U.S.-China trade/tariff war and used it as a reference for the current environment (for example, stock prices fell 30-35% from their peak in December 2018), with annual earnings per share expectations being revised down by about 20-25% over 2-3 quarters, and stock prices hitting bottom within three to five months). JPMorgan expects companies with more exposure to AI/data center/infrastructure spending to perform better compared to those with more exposure to the price-sensitive consumer end markets (personal computers, smartphones, automobiles, and industrial)
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In this context, Morgan Stanley now expects the semiconductor industry's revenue to be flat to grow by 5% year-on-year this year (previously forecasted to grow by 10%-12%), and anticipates that the upcoming EPS expectations downgrade will somewhat encourage a reduction in risks. In terms of semiconductor equipment, Morgan Stanley expects the fundamentals to weaken in the second half of the year, with the semiconductor wafer fabrication equipment (WFE) industry's revenue potentially being flat to declining by 5% year-on-year (previously forecasted to grow by 5%). Morgan Stanley believes that the EDA (Electronic Design Automation) market should be more resilient due to its leverage on semiconductor R&amp;D spending, which typically does not decrease even during economic downturns.
<h2>Key Points</h2>
Morgan Stanley expects the semiconductor fundamentals driven by tariff/trade-related dynamics to weaken, partially offset by the continued strength of artificial intelligence/data centers. Due to escalating trade tensions and the potential for significant economic disruption, JPMorgan economists predict a 60% chance of a recession in the U.S./global economy, with the baseline forecast for a U.S. recession occurring in the second half of this year. Therefore, while the current semiconductor trends remain in double-digit year-on-year growth, Morgan Stanley believes that the impact of tariffs may pressure end demand and semiconductor fundamentals in the second half of 2025. Morgan Stanley points out that end markets with higher price elasticity, particularly consumer-facing end products (such as personal computers, smartphones, and consumer electronics), face a higher risk of demand destruction compared to end markets with lower price sensitivity (such as server/AI spending). In terms of long-term trends, Morgan Stanley believes that the fundamental backdrop for AI cloud data centers and ASICs remains constructive.
Morgan Stanley notes that overall industry bookings remained stable in the first quarter, but expects deterioration in the second quarter, initiating a negative earnings revision cycle. Overall, Morgan Stanley expects first-quarter performance (revenue, margins, EPS) to meet or slightly exceed expectations, but anticipates that corporate guidance for the second quarter will be below general expectations. Morgan Stanley believes that widespread uncertainty is leading to reduced visibility for companies, especially when turnover business accounts for about 20-30% of their revenue guidance. However, Morgan Stanley does see continued strong demand for accelerated computing/AI.
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**Demand for AI/accelerated computing remains strong; the best positioning to cope with a challenging macro environment. Morgan Stanley suggests focusing more on ASIC and network-related companies (Broadcom/Marvell Tech), as commercial GPUs (NVIDIA (NVDA.US)/AMD (AMD.US)) may face more EPS downside risks due to recent tariff policy risks
** As the company continues to expand its artificial intelligence infrastructure, the demand trend for AI/accelerated computing remains strong. Despite macroeconomic fluctuations, JP Morgan's quarterly company checks and OFC meeting summaries indicate that the growth prospects for GPU/XPU continue to be robust, also attracting strong demand for 800Gbps and 1.6Tbps network and optical/copper port shipments (in the second half of this year).
JP Morgan expects that by 2025, cloud computing capital expenditures will grow at a 40% annual growth rate; and anticipates that demand for Blackwell will remain tight, exceeding supply for most of 2025. In terms of AI ASIC chips, JP Morgan continues to see strong expansion from Broadcom in customer adoption/design, while Marvell Tech remains optimistic about the annual growth rate outlook for the next two years. AI computing will also require significant high-speed networking capabilities, which are strong leadership areas for Broadcom (switching/routing), Marvell Tech (optical connectivity), Astera Labs (computing connectivity), and MACOM Technology (network connectivity).
The fundamentals of smartphones largely follow demand developments, but the fundamentals for the second quarter and the second half of the year are expected to be conservative, as consumer purchasing power is weakened by economic uncertainty. JP Morgan expects the first-quarter performance of smartphone business companies to be in line with or slightly better than expectations, driven by demand, as consumers may upgrade their devices earlier. However, due to the recent pause in consumer momentum caused by tariffs, and considering macroeconomic uncertainties, the guidance for the second quarter may be in line with or slightly below expectations. JP Morgan anticipates that companies will take a cautious stance on the fundamentals for the second half of the year, due to demand pull-forward (the second half being relatively tough), while considering tariff uncertainties and expectations of weak consumer purchasing power, companies will become more conservative

Nvidia will release its first quarter report for fiscal year 2026 ending April 27, 2025. 

According to analysts surveyed by FactSet, Nvidia's first-quarter revenue is expected to increase 66% year-on-year to $43.3 billion; adjusted earnings per share will increase 44% year-on-year to $0.88. The growth rate of revenue and profits has slowed significantly compared with the same period last year. In the same period last year, Nvidia's revenue increased by 262% year-on-year, and its adjusted earnings per share increased by 461% year-on-year.

Nvidia will release its first quarter report for fiscal year 2026 ending April 27, 2025. According to analysts surveyed by FactSet, Nvidia's first-quarter revenue is expected to increase 66% year-on-year to $43.3 billion; adjusted earnings per share will increase 44% year-on-year to $0.88. The growth rate of revenue and profits has slowed significantly compared with the same period last year. In the same period last year, Nvidia's revenue increased by 262% year-on-year, and its adjusted earnings per share increased by 461% year-on-year.

NVIDIA Financial Results for Q4 Fiscal 2025

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JPMorgan Chase expects the U.S. semiconductor industry to enter a profit revision cycle, with first-quarter performance in line with expectations, but tariffs and trade dynamics will lead to weakness in the second quarter and the second half of the year. Morgan Stanley is optimistic about resilient stocks such as Broadcom, Marvell Tech, and Analog Devices, giving them an "overweight" rating. It is expected that earnings per share will be revised down by 15-25% over the next two to three earnings seasons, and believes semiconductor stock prices may further decline by 10-15%. Executives will provide more conservative guidance for the second quarter, and the overall market faces uncertainty

- Morgan Stanley anticipates that the semiconductor sector will face a negative earnings revision cycle, with EPS expectations potentially decreasing by 15-25% over the next two to three quarters.  
- The firm highlights that ongoing tariff-related dynamics are likely to weaken semiconductor fundamentals, although strong demand in AI and data centers may provide some offset.  
- Overall, while first-quarter results are expected to meet or slightly exceed expectations, guidance for the second quarter is likely to be more conservative due to economic uncertainties and reduced consumer purchasing power.

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U.S. chip stocks enter an "earnings downgrade cycle"? Morgan Stanley has a pessimistic outlook for the earnings season and highlights these "resilient stocks."