As the semiconductor industry approaches the fourth quarter earnings season of 2025, JPMorgan analyst Harlan Sur projects sustained strength fueled by artificial intelligence (AI)-driven demand coupled with improving cyclical metrics. According to Sur, these factors are expected to uphold positive fundamental conditions through 2026, suggesting continued potential for outperformance in the sector.
Sur anticipates that companies within the semiconductor and semiconductor capital equipment (semicap) groups will report fourth-quarter performance results that align with or moderately surpass analysts’ consensus while simultaneously offering favorable commentary regarding prospects for the first quarter and the full year of 2026. This outlook is seen as conducive to extending the recent trend of upward earnings revisions, with fresh momentum anticipated as companies disclose results.
Highlighting past performance, Sur points out that over 70% of semiconductor and semicap firms under his coverage experienced positive earnings revisions during the third quarter of 2025. He foresees this upward trajectory accelerating as fourth-quarter earnings reports are unveiled.
Central to this bullish perspective is the durability of AI-related infrastructure investment. Sur emphasizes the significant growth in inference demand within AI workloads, which has rapidly increased both the volume and compute intensity required for AI applications. This rising demand is not only invigorating compute segments but is also driving expansion into memory and storage components, as well as networking and connectivity solutions essential to AI servers.
On the supply side, Sur highlights that leading-edge foundry capacities, memory, and storage facilities are substantially booked through 2026, signaling tight supply conditions that provide visibility and support for key suppliers in the value chain.
Reflecting these dynamics, Sur identifies a broadening opportunity for semiconductor companies leveraged to AI growth. He estimates the AI accelerator market to be approximately $200 billion in 2025, noting that the spending extends beyond pure compute elements into adjacent categories that contribute to AI server infrastructure.
Besides AI-driven demand, Sur observes that cyclical trends within the semiconductor sector are gaining synchronization and strength. Inventory levels across the industry remain lean, which could stimulate growth in analog semiconductor segments and across a wider range of semiconductor firms as seasonal demand potentially exceeds typical expectations.
In terms of forecasted financial performance, Sur projects overall semiconductor industry revenue growth exceeding 15% in 2025, alongside an anticipated increase in wafer fab equipment (WFE) spending between 12% and 15% year over year. However, he cautions that upward pressure on memory prices may negatively impact second-half demand, particularly in personal computing and smartphone markets.
Focusing on specific investment ideas, Sur’s top recommendations within semiconductors include Broadcom Inc., Marvell Technology Inc., Nvidia Corp., Analog Devices Inc., and Micron Technology Inc. These companies are noted for their exposure to AI-related compute, connectivity, and memory growth.
Within the semiconductor capital equipment segment, Sur continues to favor KLA Corp., which he maintains as his highest-conviction pick. This preference is coupled with positive views on Applied Materials Inc. and Lam Research Corp., underscoring confidence in their roles supporting semiconductor manufacturing.
Addressing the electronic design automation (EDA) and intellectual property (IP) sectors, Synopsys Inc. emerges as Sur’s prime selection, benefiting from increasing chip design complexity.
Additionally, in the smaller-cap space, Sur identifies MACOM Technology Solutions Holdings, Inc. and Astera Labs Inc. as attractive options due to their positioning within infrastructure and AI/datacenter markets.
Other notable preferences reinforced by Sur include Cadence Design Systems, Western Digital Corp., and Astera Labs, driven by accelerating positive revisions in revenue and earnings per share influenced by strengthening demand across industrial and automotive cyclical markets as inventories remain tight.
Overall, Sur's analysis underscores a semiconductor industry in transition, where robust AI-driven demand converges with improving cyclical fundamentals and supply chain tightness, setting the stage for sustained growth and selective investment opportunities across the semiconductor ecosystem.
Sur anticipates that companies within the semiconductor and semiconductor capital equipment (semicap) groups will report fourth-quarter performance results that align with or moderately surpass analysts’ consensus while simultaneously offering favorable commentary regarding prospects for the first quarter and the full year of 2026. This outlook is seen as conducive to extending the recent trend of upward earnings revisions, with fresh momentum anticipated as companies disclose results.
Highlighting past performance, Sur points out that over 70% of semiconductor and semicap firms under his coverage experienced positive earnings revisions during the third quarter of 2025. He foresees this upward trajectory accelerating as fourth-quarter earnings reports are unveiled.
Central to this bullish perspective is the durability of AI-related infrastructure investment. Sur emphasizes the significant growth in inference demand within AI workloads, which has rapidly increased both the volume and compute intensity required for AI applications. This rising demand is not only invigorating compute segments but is also driving expansion into memory and storage components, as well as networking and connectivity solutions essential to AI servers.
On the supply side, Sur highlights that leading-edge foundry capacities, memory, and storage facilities are substantially booked through 2026, signaling tight supply conditions that provide visibility and support for key suppliers in the value chain.
Reflecting these dynamics, Sur identifies a broadening opportunity for semiconductor companies leveraged to AI growth. He estimates the AI accelerator market to be approximately $200 billion in 2025, noting that the spending extends beyond pure compute elements into adjacent categories that contribute to AI server infrastructure.
Besides AI-driven demand, Sur observes that cyclical trends within the semiconductor sector are gaining synchronization and strength. Inventory levels across the industry remain lean, which could stimulate growth in analog semiconductor segments and across a wider range of semiconductor firms as seasonal demand potentially exceeds typical expectations.
In terms of forecasted financial performance, Sur projects overall semiconductor industry revenue growth exceeding 15% in 2025, alongside an anticipated increase in wafer fab equipment (WFE) spending between 12% and 15% year over year. However, he cautions that upward pressure on memory prices may negatively impact second-half demand, particularly in personal computing and smartphone markets.
Focusing on specific investment ideas, Sur’s top recommendations within semiconductors include Broadcom Inc., Marvell Technology Inc., Nvidia Corp., Analog Devices Inc., and Micron Technology Inc. These companies are noted for their exposure to AI-related compute, connectivity, and memory growth.
Within the semiconductor capital equipment segment, Sur continues to favor KLA Corp., which he maintains as his highest-conviction pick. This preference is coupled with positive views on Applied Materials Inc. and Lam Research Corp., underscoring confidence in their roles supporting semiconductor manufacturing.
Addressing the electronic design automation (EDA) and intellectual property (IP) sectors, Synopsys Inc. emerges as Sur’s prime selection, benefiting from increasing chip design complexity.
Additionally, in the smaller-cap space, Sur identifies MACOM Technology Solutions Holdings, Inc. and Astera Labs Inc. as attractive options due to their positioning within infrastructure and AI/datacenter markets.
Other notable preferences reinforced by Sur include Cadence Design Systems, Western Digital Corp., and Astera Labs, driven by accelerating positive revisions in revenue and earnings per share influenced by strengthening demand across industrial and automotive cyclical markets as inventories remain tight.
Overall, Sur's analysis underscores a semiconductor industry in transition, where robust AI-driven demand converges with improving cyclical fundamentals and supply chain tightness, setting the stage for sustained growth and selective investment opportunities across the semiconductor ecosystem.