Q2 Analog Semi Preview: normalization turning into recovery enhanced by AI

Research evidence excerpt

Q2 Analog Semi Preview: normalization turning into recovery enhanced by AI

es and stabilizing industrial production support

recovery across factory automation and broad markets. AI is increasingly becoming a

meaningful analog opportunity, with demand extending beyond the rack into power infra.

Analog IC vendors enjoy the largest content pool from AI power but discrete suppliers (esp.

those with SiC/GaN) could gain the most share as 800V approaches. Across the group,

most AI-exposed revenue streams appear on track to grow 50-100%+ this year.

Auto: weak units, but content more than offsets

Automotive fundamentals remain mixed, with China continuing to outperform while

Europe remains sluggish and North America stable. However, suppliers are now largely

shipping at consumption rather than correcting inventories, creating a healthier setup in

Q2 and into 2H26. While a broad replenishment cycle has yet to emerge, lean inventories

and ongoing content gains from electrification, ADAS and software-defined vehicles

continue to support demand despite muted vehicle production growth.

Valuations reasonable; top picks TXN, ON, ADI See glossary of abbreviations at the

Despite strong YTD performance, diversified semis have remained resilient in this recent end of the report

sector pullback (large caps down -3% to +4% QTD vs. SOX -9%) while valuations are

largely in-line with historical medians unlike other subsectors in our coverage. We

continue to see upside to estimates as industrial demand recovers, inventories normalize

and operating leverage improves, with ADI benefiting from accelerating industrial and

infrastructure demand, MCHP offering the largest earnings recovery and MCU leverage,

TXN providing broad industrial exposure and utilization upside, and ON leveraged to