Broadcom, Marvell, Analog Devices among JPMorgan’s favorite chip stocks for 2025

J.P. Morgan is the latest investment firm to issue its outlook for the semiconductor industry for 2025, and like others before it, it sees big things for the application specific integrated circuit market, due largely to the explosive growth in artificial intelligence.

The research firm noted that companies tied to AI compute, networking and storage were all beneficiaries in 2024 amid continued strong infrastructure build out, all of which has resulted in “strong share price outperformance and strong positive earnings revisions trends.”

Conversely, companies that are diversified in the cyclical parts of the market (such as analog, microcontrollers, semiconductor capital equipment) have underperformed, a trend that the research firm expects to continue into the first-half of next year.

“We expect the non-AI end-markets to move into a more synchronized cyclical recovery profile as we move through the 2H of the year as semiconductor industry revenues turned positive Y/Y in 4Q23 and continued to improve through 2024, and should continue in 2025,” analysts at the firm wrote. “We believe the positive earnings revision mix will continue to improve as fundamental dynamics, like excess customer chip inventories across markets, continue to improve in areas of enterprise, industrial, and automotive.”

Recommendations

As such, J.P. Morgan is focusing on companies like Broadcom (NASDAQ:AVGO), Marvell Technology (NASDAQ:MRVL) and Analog Devices (NASDAQ:ADI), all of which it says are “leveraged to AI [and] accelerated computing.” It also likes Synopsys (SNPS) and KLA Corp. (KLAC), given that both are involved in the part of the supply chain that are benefitting from leading-edge chip advancements, due to rising complexity and equipment spending.

“We believe these companies/trends are more insulated from macro trends,” analysts at the firm said.

2025 outlook

Looking to next year, J.P. Morgan’s analysts expect chip sales to rise between 10% and 12% year-over-year, after being up between 6% and 8% this year. It also expects wafer fab equipment spending to rise 5% in 2025 as “accelerated compute/ AI demand for leading edge silicon continues to strengthen and manufacturing complexity continues to rise.”

Overall industry revenues are expected to increase anywhere between 16% and 18% this year, also due to strong AI and accelerated demand. However, other parts of the chip space, such as PC, memory and smartphones, have also started to see improvements, which could bode well for next year, the analysts said. “We expect continued gradual cyclical improvements and for all the end markets to move into a more synchronized cyclical recovery profile as we move through the 2H of next year.”

Also positively mentioned in the note were Nvidia (NASDAQ:NVDA), which continues to benefit from AI accelerator spending; Arm (ARM), thanks to its position in compute intellectual property; AMD (AMD), thanks to its position in AI and general compute servers, and Micron (MU), given its high exposure to enterprise solid-state drives, where “AI demand trends remain strong.”