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Investing.com-- J.P. Morgan analysts expect the semiconductor industry to deliver in-line to slightly better second-quarter results, driven by strong AI demand, early signs of a cyclical recovery, and tariff-related inventory pull-ins.
However, the bank remains cautious on the outlook for the second half of 2025, warning that trade tensions and potential new tariffs could weigh on demand.
Analysts noted that approximately 80-85% of covered semiconductor and semiconductor capital equipment companies saw positive earnings revisions in the first quarter of 2025, up from 30-50% in 2023-2024.
They expect this trend to continue into the second-quarter earnings season, with results likely meeting or slightly exceeding expectations.
"AI/accelerated compute demand remains strong," with cloud datacenter capex projected to grow 40% year-over-year in 2025, JPMorgan analysts said in a note.
They noted that companies like Broadcom (NASDAQ:AVGO), Marvell Technology (NASDAQ:MRVL), and Nvidia (NASDAQ:NVDA) are well-positioned to benefit from AI infrastructure build-outs.
However, the bank cautioned about potential headwinds in the second half of the year due to tariff uncertainties and demand pull-forward effects.
Consumer-facing segments, such as smartphones and PCs, may face softer demand, while industrial and automotive markets could see muted cyclical recovery trends.
JPMorgan remained selective, favoring stocks leveraged to AI, semiconductor equipment, and chip design software, including KLA Corp (NASDAQ:KLAC) and Synopsys Inc (F:SNPS).
The firm expects wafer fab equipment (WFE) spending to be flat in 2025 but sees long-term growth driven by advanced manufacturing complexity.
While the market appears complacent about tariff risks, JPMorgan expects a potential pullback as trade dynamics offset positive cyclical trends, analysts added.