Investing.com – The recent rally in semiconductor stocks is likely to stall later this year, according to analysts at Jefferies.
Chipmakers jumped in 2024, reflecting a surge in interest in the processors needed to power data centers that carry AI developments. For the year, the Philadelphia Semiconductor index as a whole is up more than 19%.
In particular, shares in Nvidia (NASDAQ 🙂 ), whose AI-optimized chips have become synonymous with hype surrounding the application of the emerging technology, have risen 171% in the past year.
While they expect this increase in semiconductor names to peak in the “March-April” period with around 24% year-over-year growth, Jefferies analysts led by Janardan Menon said in a note to clients that “the upside potential for most chip stocks should be modest” in 2025.
“[S]increasing demand in major end markets such as PCs, smartphones, general purpose servers, [Internet of Things]consumer electronics and networking are still weak and inventory levels are low, we do not foresee a downturn in the cycle this year,” the analysts wrote. “Instead, we foresee stagnation in the semiconductor cycle with healthy double-digit growth through the end of 2025. “
Price trends in chip stocks are expected to “reconcile,” the analysts said, adding that the stock’s direction over the next 12 months is likely to depend on how confident investors are in the companies’ prospects for revenue and earnings growth in 2026.
In terms of specific stocks, analysts said they preferred Dutch wafer maker ASM to domestic rival ASML ( AS: ), arguing that ASM is “most oriented” to increasing spending on advanced logic chips and is less exposed to market turmoil in China. .
They noted that ASML, “while not at risk for 2025,” needs to achieve orders worth 5 to 6 billion euros per quarter to meet 2026 expectations. But that goal could be complicated by major customer Samsung ( KS: ), which has been hit with extra costs as it struggles to supply top-end chips to Nvidia, analysts said.
