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Deutsche Bank Highlights Semiconductor Outlook for 2025

According to a recent analysis by Deutsche Bank, the semiconductor industry is poised for significant growth in 2025, particularly driven by advancements in artificial intelligence (AI) and a general rebound across various semiconductor segments.

The bank’s research suggests a projected 16% year-over-year increase in the ex-memory semiconductor sector, up from 8% in the preceding year. This growth is largely attributed to the sustained dominance of AI technologies, while other subsectors are also expected to show improvement.

“We anticipate another strong year for GPU-based accelerators, primarily led by key players like NVIDIA and to a lesser extent Advanced Micro Devices,” the analysts noted. They also highlighted contributions from ASICs and networking companies such as Broadcom, NXP Semiconductors, and Allegro MicroSystems.

Deutsche Bank’s outlook indicates that “hyperscaler capital expenditure growth,” coupled with ongoing technological innovations, will continue to drive demand within the AI sector.

Looking beyond AI, the broader semiconductor market is expected to recover from its cyclical lows experienced in 2024. Notably, companies like NXP Semiconductors and ON Semiconductor are identified for their structural enhancements, measured growth predictions, and appealing valuations.

Analysts from the bank emphasized the importance for investors to target companies that may be at the lower end of the growth spectrum but possess significant upside potential.

Despite the recent underperformance of the Philadelphia Semiconductor Index, which experienced a 6% decline in 2024, there is a sense of cautious optimism about the upcoming year, bolstered by improving fundamentals. The analysts view this trend as establishing a “reasonable bar” for expectations in 2025.

Nonetheless, challenges such as subdued macroeconomic conditions, geopolitical risks, and high valuations continue to loom over the industry. In response, Deutsche Bank advises investors to be selective in their investments, favoring stocks like NXP Semiconductors and ON Semiconductor in the general market, as well as Broadcom and Marvell Technology in the AI space. These firms are considered well-prepared to leverage growth opportunities and adapt to changing industry trends.

Source
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