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Investing.com -- European diversified chipmakers head into first-quarter earnings with automotive demand under pressure and industrial activity recovering, as AI-driven growth increasingly dominates the sector’s trajectory, according to a BofA Global Research in a note dated Wednesday.
BofA raised its price objective on STMicroelectronics to €35/$41 from €32/$38, maintaining a Neutral rating, citing improving growth prospects and AI cycle exposure.
The brokerage forecasts STM revenue of $3.09 billion for 1Q26, 1-2% above both consensus and company guidance of $3.04 billion, with EPS of $0.19, 12% above consensus.
For full-year 2026, BofA sits 1% above consensus on STM revenue at $13.6 billion, implying 15.1% year-on-year growth, and 5% above on EPS.
Global electric vehicle sales are forecast to grow 8% year-on-year in 2026, led by battery EVs at 11% versus plug-in hybrids at 3%.
Against that backdrop, BYD sales fell 20% year-on-year and 30% year-to-date through March.
Rising memory prices present an additional headwind, with BofA estimating memory could reach roughly 1% of auto OEM bill-of-materials costs, implying a 50 basis point gross margin headwind for OEMs.
On the industrial side, global PMIs came in at 51.3 in March, the second-highest reading since June 2022, while China’s fixed asset investment grew 1.8% year-on-year in January-February 2026, reversing a 15% decline in December 2025.
Infineon increased its share of the automotive microcontroller market to 37% in 2025 from 33% in 2024, extending its lead over second-placed Renesas at 23%, according to Gartner data cited in the note. STM slipped to 7% from 9% in the same segment.
STM gained ground in industrial microcontrollers, rising to 17% from 16%, while market leader Microchip fell to 23% from 27%.
In discrete semiconductors, Infineon lost share to 15% from 16%, with Asia-Pacific vendors gaining from 12% to 13%. STM dropped from 7% to 5% in that segment.
The diversified sector now trades at 11.9x 12-month forward EV/EBITDA, a 33%/13% premium to its five-year and ten-year medians respectively. The sector rerated 13% year-to-date alongside 23% average share price gains.
Consensus 12-month forward EPS estimates have risen 10% year-to-date for Infineon and 14% for STM, while Osram has seen a 59.3% downward revision and Melexis a 9.5% cut.
Diversified semiconductor inventory days stood roughly 54% above pre-COVID averages in 4Q25, with Melexis the most stretched at nearly double pre-COVID levels.
STM guided inventory days of approximately 140 at the end of 1Q26, up from 134 days in 4Q25. Infineon targets approximately 150 days by year-end.