KeyBanc Analysts Adjust Semiconductor Targets Amid Trends

KeyBanc Capital Markets Adjusts Semiconductor Targets

KeyBanc Capital Markets has recently made headlines by revising their targets for various semiconductor companies, influenced by a review of the supply chain that showed mixed findings. According to analysts, while the demand for AI technologies remains robust, the overall demand trends tell a different story, revealing weakness across many sectors, except for one notable market: China.

AI Demand vs. Weak Market Trends

In their quarterly evaluation, KeyBanc analysts discussed that despite most end markets showing signs of struggle, China stands out as a beacon of hope, particularly in the automotive and smartphone industries. The demand for smartphones in China has been spurred on by government subsidies, leading to enhanced performance in high-end smartphone sales.

Concerns Over iPhone Demand

However, caution has been expressed regarding the demand for Apple's iPhone 16. Analysts indicated that lower-end iPhone models are facing substantial challenges, with sluggish sales in both the U.S. and European markets. This illustrates a complex picture where premium products are thriving in certain regions, while budget options falter.

Mixed Results in AI Sector

When examining the AI sector, which includes critical components like GPUs and AI ASICs, KeyBanc highlighted contradictory results. Although there is a strong demand for AI-related technologies, challenges exist in the sector, complicating the overall sentiment. The performance of Blackwell GPUs has been affected by low manufacturing yields and supply constraints that have hampered NVL server racks, critical for processing international data effectively.

Impact on Company Estimates

As a result of these varying trends, KeyBanc lowered their revenue forecasts for key players in the market. Notably, estimates for NVIDIA (NASDAQ: NVDA) and Advanced Micro Devices (NASDAQ: AMD) were cut significantly. The forecast for data center compute revenues for FY26 has been adjusted downward from $200 billion to $185 billion.

Adjustments in Price Targets

Moreover, KeyBanc updated their price targets, particularly for AMD’s data center GPU revenues, bringing it down to $150 per share. The report also highlighted expectations for Microchip Technology (NASDAQ: MCHP) and ON Semiconductor (NASDAQ: ON), whose price targets were revised to $70.

Positive News on Qualcomm and Skyworks

On a brighter note, the analysts raised estimates for Qualcomm (NASDAQ: QCOM) and Skyworks Solutions (NASDAQ: SWKS). This adjustment was largely due to the stronger-than-expected smartphone market recovery in China, once again demonstrating how varied regional markets can impact global trends.

Outlook for the Semiconductor Sector

In closing, despite this mixed outlook presented by KeyBanc, there remains a tide of optimism. Analysts believe that the semiconductor sector may soon be approaching the bottom of its cycle, indicating potential recovery on the horizon.

Frequently Asked Questions

What prompted KeyBanc's revised targets for semiconductor companies?

The revisions were largely based on a quarterly supply chain review that revealed mixed market conditions, particularly between strong AI demand and weakening trends in broader markets.

How is the Chinese market affecting semiconductor demand?

China has been identified as a bright spot with recovering growth, especially in the automotive and smartphone sectors, fueled by government subsidies supporting smartphone sales.

What concerns did KeyBanc express regarding Apple's iPhone models?

Analysts noted that while high-end models perform well, lower-end iPhone models are struggling with weak demand in both U.S. and European markets.

Which companies had their estimates lowered by KeyBanc?

NVIDIA, Advanced Micro Devices, Microchip Technology, and ON Semiconductor had their estimates lowered due to the challenging market situations.

Are there any companies that saw positive adjustments?

Yes, Qualcomm and Skyworks Solutions saw raised estimates due to better-than-expected recovery in demand within the Chinese smartphone market.

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