According to JP Morgan, the performance of the semiconductor and equipment industry in the last quarter is expected to meet or exceed expectations, recommending to "overweight" NVIDIA, Broadcom, and others

JP Morgan's report indicates that entering the fourth quarter earnings period for the semiconductor/semiconductor equipment industry (and more broadly for 2026), the bank expects companies to announce fourth quarter results that meet or exceed expectations, while providing constructive comments on the outlook for the first quarter and the full year of 2026, which will support the positive earnings revision trend seen by the bank in recent quarters. JP Morgan believes this, in turn, will provide support for stocks to continue to outperform the market until the end of this year. The positive earnings revision trend remained strong in the third quarter of last year, with over 70% of the semiconductor/semiconductor equipment companies covered by the bank showing positive revisions, and the bank expects these trends to accelerate further during the fourth quarter earnings period.

The bank maintains its core view that the fundamentals supporting strong growth in AI-related infrastructure spending will remain solid (driven by rapidly growing inferred demand for AI computing, along with the increasing computational intensity of AI workloads), with most of the related supply chain capacity already booked for 2026 (especially for advanced process wafer foundry capacity and memory/storage). The bank still sees that, driven by improvements in production efficiency, yield, and cost reductions, there is short-term upside potential for AI-related companies. At the same time, the bank expects companies to provide constructive comments on the spending/activity outlook for 2027 based on strong order flow and growing backlogs, thereby supporting stock prices.

Relative to previous levels, the bank sees considerable upside potential in the total addressable market for AI accelerators (approximately $200 billion in 2025, with a conservative annual compound growth rate of over 50% in the coming years). Incremental spending will benefit not only computing suppliers but also the entire semiconductor value chain, including memory/storage (increased content of DDR/HBM/NAND/HDD required for AI servers), networking/connectivity (scaling of AI computing), semiconductor equipment/EDA (increased complexity in design and manufacturing), and even analog/MCU fields. Demand signals from key cyclical end markets also indicate that this year's recovery will become more synchronized, which should drive analog/broad-based semiconductor companies to achieve better-than-seasonal growth against the backdrop of streamlined channel and customer inventory levels.

In summary, JP Morgan expects the semiconductor industry to grow revenue by over 15% this year, with semiconductor equipment spending expected to grow by 12% to 15% year-on-year. Although the recent rise in memory prices has not yet affected demand, the bank believes this may limit end demand in the second half of the year, particularly in the personal computer and smartphone sectors. The bank remains selective in its coverage and continues to favor its preferred targets: "Overweight" Broadcom (AVGO.US), Marvell (MRVL.US), NVIDIA (NVDA.US), Analog Devices (ADI.US), Micron (MU.US), KLA (KLAC.US), and Synopsys (SNPS.US). Among smaller semiconductor companies, the bank is optimistic about MACOM Technology Solutions (MTSI.US) (rating "Neutral") and "Overweight" Astera Labs (ALAB.US), as they benefit from infrastructure and AI/data center spending