China 'Increasingly A Risk': Analyst Previews Semiconductor Stocks Ahead Of Earnings

Ahead of fourth-quarter earnings, Bank of America analyst Vivek Arya is looking closely at automotive demand headwinds and a possible trade war with China.

The Semiconductor Analyst: Arya also published a note on the semiconductor industry on Tuesday, covering several companies:

Texas Instruments Inc TXN — Neutral rating with a price target of $215.
NXP Semiconductors NV NXPI — Buy rating with a price target of $255.
ON Semiconductor Corp ON — Buy rating with a price target of $75.
Microchip Technology Inc MCHP — Underperform rating with a price target of $65.
Analog Devices Inc ADI — Buy rating with a price target of $265.

Arya noted that sentiment is slightly negative compared to last quarter. He added that short-term turbulence can be supplanted by a “rotation into cyclicals” during the second half of 2025.

Arya is still concerned about trade relations between the U.S. and China.

“China is also an emerging risk, where growing trailing-edge capability means intensifying competition in low-end/non-core markets for vendors which could drive pricing down,” Arya wrote. “Fallout from any trade war retaliation could force a reset of estimates.”

Texas Instruments: The analyst’s Neutral rating for Texas Instruments is linked to another possible cut to estimates in the short term. Arya expects a business “trough” during the year’s first half based on waning automotive demand. The analyst also noted the company’s business in China.

“TXN is the largest vendor among diversified peers and has relatively high China exposure (20% of sales vs. 10-
35% for peers). Both the company and our checks suggest TXN is using aggressive pricing as a lever to preserve share.”

Bank of America’s expectations for fourth-quarter earnings are in line with consensus.

NXP: Arya cited strong margins, relatively low market valuation, fast growth and an “inevitable” automotive recovery as the rationale for his Buy rating for NXP.

Amid expectations for underperformance in the first half of the year, Arya expects NXP to endure a “shallower” downcycle than its peers.

ON: The analyst’s revenue expectations for ON in the fourth quarter fall slightly below Wall Street consensus estimates.

Still, Arya is optimistic for the year’s second half, citing the company’s advantage in electric vehicles.

“In Auto, recent China strength may be reflecting pull-in ahead of tariffs while 2H’24 EV ramps in Europe fell below expected volumes. Industrial faces headwinds from worsening macros in Europe/China and may have not corrected enough (-30% peak-to-trough decline to date vs. at least -40% for peers),” the analyst said.

Microchip: Arya cites CEO uncertainty, inventory pile-up, and operational restructuring efforts as reasons for his pessimism in Microchip Technology. The analyst expects revenue and pro forma earnings-per-share to fall below consensus expectations in the fourth quarter.

Arya says that shares look expensive at current valuations with possibly significant downside in the long run.

Analog Devices: The analyst expects Analog Devices to report revenue and pro forma earnings-per-share around Wall Street’s estimates.

Arya cited the company’s differentiated precision analog portfolio as support for a possible turnaround in the second half of the year.

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