Summary of J.P. Morgan Semiconductor Conference Call Industry Overview - The semiconductor industry is projected to reach a value of $770 billion by CY25, with a compound annual growth rate (CAGR) of 7-8% [9][10] - The industry is experiencing lower cyclicality due to end-market diversification and disciplined supply growth, which enhances profitability and free cash flow expansion [9][10] - Key drivers of growth include cloud datacenters, electric vehicles (EV), Internet of Things (IoT), and artificial intelligence (AI) [9][10] Stock Performance - Semiconductor stocks have outperformed the market over various time frames, with the SOX (Semiconductor) Index showing a 29% return over the past year and a 42% return over three years [7][8] - Semiconductor capital equipment stocks have also shown strong performance, with a 22% return over the past year [7][8] Revenue and Earnings Outlook - Industry revenue growth is expected to accelerate to 15-20% in 2025, following a 6-8% increase in CY24 [11] - Preliminary outlook for 2026 indicates semiconductor revenues will increase by 10-15%, with wafer fabrication equipment (WFE) up 10-12% and software up 10-15% [11] - Positive earnings revisions have been noted for approximately 75% of covered semiconductor companies in 2025, compared to 40% in 2024 [12] Market Dynamics - The last four down-cycles in the semiconductor market have been demand-driven rather than supply-driven, indicating a more disciplined approach to supply expansion [11] - Geopolitical uncertainties, potential global tariffs, and export restrictions are identified as key risks that could affect recovery in 2026 [11] Key Company Insights - Large-cap top picks include AVGO (Broadcom), ADI (Analog Devices), MRVL (Marvell), MU (Micron), KLAC (KLA Corporation), and SNPS (Synopsys) [11] - Small and mid-cap top picks include ALAB (Alphawave), MTSI (Macom Technology Solutions) [11] Custom ASIC Market - The custom ASIC market is experiencing a resurgence, with a projected $30 billion opportunity in CY25, growing at a CAGR of over 30% [35] - Broadcom and Marvell are expected to dominate this market, with Broadcom projected to drive over $55 billion in total AI revenue in FY26 [35] AI Demand and Infrastructure - AI chip shipments are expected to grow at a CAGR of over 58% from 2022 to 2028, with AI ASICs projected to account for over 50% of overall XPU unit shipments by CY28 [28] - Cloud and hyperscale data center capital expenditures are expected to grow by 50% year-over-year in CY26, driven by aggressive product roadmaps from GPU providers and internal custom silicon deployments [32] Inventory Levels - Semiconductor inventory levels are approaching normalized levels after significant drawdowns from peak levels in 2023, indicating positive cyclical dynamics [22][20] Conclusion - The semiconductor industry is poised for continued growth driven by technological advancements and increasing demand for AI and custom chips, despite potential geopolitical risks and market volatility [9][11][35]

Investment Rating - The semiconductor industry is rated as "Overweight" (OW) for several key companies including AVGO, ADI, MRVL, KLAC, SNPS, and CDNS, with a focus on AI ASIC semiconductors and rising chip design complexity [4][11][12]. Core Insights - The semiconductor industry is projected to grow to a $680 billion market by CY25, with a compound annual growth rate (CAGR) of 7-8% driven by increased demand from sectors such as cloud datacenters, electric vehicles (EV), Internet of Things (IoT), and artificial intelligence (AI) [10][11]. - The custom chip (ASIC) market is experiencing a resurgence, with a projected $30 billion opportunity in CY25, growing at a CAGR of over 30% [18][11]. - The semiconductor sector has shown strong stock performance over the past 20 years, outperforming the S&P 500 index significantly [6][7]. Market Positioning and Intelligence - The semiconductor sector has outperformed the market over various time frames, with the SOX index showing a 29% CAGR over three years and 24% over ten years [7]. - The industry is witnessing lower cyclicality due to end-market diversification and disciplined supply growth, which enhances profitability and free cash flow [10][11]. - Earnings revisions have been positive for approximately 80% of covered semiconductor companies, indicating a strong recovery trend [12][11]. Key Takeaways from Management Access Forum - Continued strong spending in AI and datacenter sectors is expected, driven by hyperscale capital expenditures [16]. - The custom ASIC landscape is diversifying, which is beneficial for the semiconductor value chain [16]. - Companies like Broadcom and Marvell are positioned to dominate the custom ASIC market, with Broadcom expected to generate over $20 billion in AI revenues in CY25 [18][11]. Growth Opportunities - The scale-up networking market is anticipated to reach nearly $25 billion by 2029, with significant growth expected in switching chips [39][35]. - The semiconductor industry is focusing on advanced technologies such as 2nm and 3nm chip designs, which are critical for future growth [20][27]. - Broadcom and Marvell are actively engaging in next-generation ASIC programs, which are expected to ramp up production significantly in the coming years [25][21].

Investment Rating - The report assigns an "Equal-weight" rating to Marvell Technology Group Ltd, with an industry view classified as "Attractive" [5][33]. Core Insights - Marvell is positioned to benefit from a rapidly growing total addressable market (TAM) in AI, targeting approximately $19 billion in AI data center revenue by CY2028, with $11 billion expected from XPU compute/attach [3][8]. - The company has increased its data center TAM to $94 billion, reflecting a 26% growth from the previous year, and anticipates that Custom XPU and "Custom XPU attach" will reach $55.4 billion by CY2025 [3][8]. - Marvell's custom silicon pipeline includes over 50 projects, which could yield a potential lifetime revenue of $75 billion, indicating significant growth opportunities in the AI sector [10][18]. Summary by Sections Financial Projections - Expected EPS for fiscal years are projected as follows: $1.57 for FY2025, $2.76 for FY2026, $3.15 for FY2027, and $3.44 for FY2028 [5]. - The company anticipates a gross margin of 60.2% in 2025, decreasing slightly to 57.7% by 2028 [37]. Market Position and Strategy - Marvell aims for a 20% market share in the new data center TAM, with over 50% of data center revenue expected to come from custom solutions [8][10]. - The company has announced two new XPU compute projects and four XPU attach sockets for emerging hyperscaler customers, enhancing its competitive position in the market [10][18]. Customer Engagement and Growth Potential - Marvell has secured 18 custom compute sockets with U.S. and emerging hyperscalers, indicating strong demand for its custom silicon solutions [10][27]. - The company is optimistic about its growth potential in optical technologies, which are expected to provide higher margins compared to custom silicon [18][33]. Risk and Valuation Considerations - The report suggests that while Marvell has significant AI opportunities, the success rate of custom silicon projects has been mixed, leading to a more conservative outlook on some aspects of its growth [12][20]. - The price target for Marvell is set at $73.00, reflecting a valuation that considers both growth potential and current market conditions [5][28].