Key Points Industry Overview * Semiconductor Sector Underperformed in 2024: The Semiconductor sector underperformed the broader market in 2024, driven by moderation in AI stocks and underperformance in Semiconductor Capital Equipment and Analog/MCU. * Outlook for 2025: Goldman Sachs expects the Semiconductor and Semiconductor Capital Equipment sectors to outperform the broader market in 2025, driven by sustained outperformance in AI-enablers and a cyclical recovery in areas like Analog Semiconductors, MCUs, and Wafer Fab Equipment. * Macroeconomic Backdrop: The firm expects a favorable macroeconomic backdrop in 2025, with global GDP growth forecasted at 2.7%, supporting a cyclical recovery. Sub-Sector Views * Compute/Networking: AI-enablers like CRDO, NVDA, AVGO, MRVL, and ARM significantly outperformed in 2024. The firm expects demand for Compute and Networking to grow further in 2025/26 as model sizes and complexity evolve. * Accelerated Computing: The firm expects high demand for Accelerated Computing in 2025, driven by the ramp of next-generation accelerators and the low base. * Networking: Networking companies are expected to benefit from increased data rates and higher attach rates of Networking devices. * Server CPU: The general server market is expected to grow modestly in 2025, with AMD gaining share in server CPUs and Arm-based CPUs growing their presence in the Cloud. * PC CPU: The firm expects PC CPU shipments to remain soft in the near-term but improve in 2H25 driven by the end of life of Windows 10 and the proliferation of AI PCs. * Broad-Based Semiconductors: The firm expects another round of estimate cuts heading into and coming out of 4Q24 earnings season, but believes this will mark the 'last cut' this downturn. * Automotive Semiconductors: The firm remains positive on the long-term drivers of through-cycle growth in Automotive semiconductors, including Electrification and ADAS. * Memory/Storage: The firm expects industry bits to grow mid-teens (%) yoy in 2025 and pricing to stay relatively soft in the first half with a potential recovery in 2H. * Semiconductor Capital Equipment: The firm remains optimistic on the Wafer Fab Equipment market outlook for 2025 and 2026, driven by the transition to N2 at TSMC, continued strength in HBM, and a mild recovery in NAND. * Semiconductor Materials: The firm remains optimistic on the sub-sector as a whole and Entegris more specifically over the next 12 months, driven by factors like N2 ramp at TSMC and recovery in traditional end-markets. Best Positioned Single Stock Ideas * NVDA: The firm reiterates its Buy rating on NVDA, with a 12-month price target of 255. * MU: The firm reiterates its Buy rating on MU, with a 12-month price target of 85. * TER: The firm maintains its Buy rating on TER, with a 12-month price target of 128. Downgrades and Upgrades * Downgrade AMD to Neutral: The firm downgrades AMD to Neutral from Buy, with a 12-month price target of 257. Key Risks * Weaker-than-expected demand: A weaker-than-expected demand for semiconductors could lead to downside risks for the industry. * Supply chain disruptions: Supply chain disruptions could impact production and lead to higher prices. * Competition: Intensified competition could impact pricing and margins. * Regulatory changes: Regulatory changes could impact the industry and its participants.
Americas Technology_ Semiconductors_ 2025 Outlook_ Own Industry-Leaders in AI and Cyclicals; Upgrade NXPI to Buy and Downgrade AMD to Neutral
-·2025-01-15 07:04