Deutsche Bank's Semiconductor Outlook for 2025

Deutsche Bank analysts have outlined their semiconductor outlook for 2025, highlighting opportunities in artificial intelligence (AI) and broad-based semiconductors.

Growth Projections

The bank expects a 16% year-over-year growth in the ex-memory semiconductor sector, up from 8% in 2024. AI is anticipated to dominate while a broader recovery appears in other subsectors.

AI Sector Growth

On the AI front, GPU-based accelerators are expected to deliver yet another year of outsized growth, driven primarily by NVIDIA (NVDA), along with contributions from AMD, ASICs, and Networking players such as AVGO, NXPI, and ALAB. The analysts believe that hyperscaler capital expenditure growth and technological advancements will sustain the demand for AI-related products.

Broader Semiconductor Space

In the wider semiconductor sector, Deutsche Bank forecasts incremental improvement as the industry rebounds from cyclical lows seen in 2024. Companies like NXP Semiconductors (NXPI) and ON Semiconductor (ON) are highlighted for their structural improvements, conservative growth expectations, and attractive valuations.

Investment Strategy

Analysts recommend that investors focus on companies positioned at the lower end of the growth spectrum but with substantial upside potential. Despite the Philadelphia Semiconductor Index (SOX) lagging behind the S&P 500 with a -6% performance in 2024, there’s cautious optimism for 2025 driven by improving fundamentals.

Challenges Ahead

The analysts note challenges including muted macroeconomic conditions, geopolitical uncertainties, and elevated valuations.

Recommended Stocks

For investors, Deutsche Bank advocates maintaining selectivity, favoring stocks such as NXPI and ON in the broad-based space, as well as AVGO and MRVL in the AI domain. These companies are considered well-positioned to capture growth acceleration and adapt to evolving industry dynamics.