Chip stocks fall with Nvidia after data center rev disappointment
Investing.com -- The automotive semiconductor sector has returned to positive growth after seven consecutive quarters of decline, according to a new UBS report that maintains its optimistic outlook on analog semiconductors.
The sector achieved a 1% year-over-year revenue growth in the second quarter of 2025, marking what UBS describes as an inflection point.
Consensus expectations suggest this positive momentum will continue, with projected growth of 4% in Q3 and 14% in Q4.
UBS has revised its automotive semiconductor revenue forecast to a 7% year-over-year decline for 2025, an improvement from its previous estimate of a 9% drop.
For 2026, the bank now projects 11% growth, up from its earlier 9% forecast.
The industrial semiconductor segment grew 2% year-over-year in Q2 2025, aligning with consensus estimates.
UBS now forecasts industrial revenues across major analog players to increase by 8% in 2025, compared to its previous estimate of approximately 6%, following a 19% decline in 2024. For 2026, UBS projects 14% growth.
Regional analysis shows normalization in the automotive semiconductor market for 2025, with China’s demand expected to grow 4% year-over-year, while non-China markets remain flat.
In 2026, both China and non-China markets are projected to grow by 8%.
Year-to-date, China’s car volumes have increased 14% year-over-year, with new energy vehicles (NEV) up 37%.
July figures showed overall car volume growth of 14% with NEV growth of 25%, suggesting some slowdown in the second half of 2025 due to a strong comparison base.
Leading indicators present an increasingly positive outlook for 2026, with quarter-over-quarter semiconductor revenue growth turning positive again in Q2 2025. Semiconductor inventory days continued to decline in Q2 and are expected to decrease further in the second half of 2025.
UBS identified potential downside risks including deteriorating car production/sales alongside increasing tariffs, semiconductor pricing pressure, and potential deterioration in China demand in the second half of 2025.
Analog semiconductors are currently trading at approximately 20 times price-to-earnings for 2026, compared to the 10-year average 12-month forward P/E of 19x. UBS’s preferred stocks in the sector include Texas Instruments, Infineon, and Renesas, all rated as "Buy."
The bank’s least preferred names are ON Semiconductor and Melexis, both rated as "Neutral."
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