JPMorgan downgraded NXP Semiconductors (NASDAQ:NXPI) to Neutral in a note Thursday, citing concerns over the auto market's potential for multi-quarter weakness.
The shift in outlook comes as global demand, particularly for electric vehicles (EVs), shows signs of softening, according to the bank.
The automotive sector has been a standout performer over recent years, but JPMorgan analysts now foresee a slowdown, with the auto market poised for a downturn after several quarters of outperformance compared to other end markets.
The downgrade is part of the bank's broader analysis of the semiconductor space, where trends in end markets, inventories, and geopolitical factors continue to shape the industry.
"End market demand trends account for the majority of this note," JPMorgan stated, highlighting ongoing strength in the data center sector, driven by AI accelerator demand.
However, the report points out that industrial, IoT, and automotive markets are under pressure.
Analysts express more caution towards other companies in the sector, including Texas Instruments and Micron, while favoring semi-cap and BBB-rated designers like Broadcom and Marvell.
Inventories in the semiconductor industry remain elevated, but JPMorgan notes that they are gradually declining as companies work through their excess stock.
JPMorgan also addressed the impact of China on the semiconductor industry, noting stable to marginally improving demand in the region, especially for legacy products not impacted by export controls.
The upcoming U.S. election and potential policy changes related to export controls and supply chains are also said to be factors that could influence the industry moving forward.