JPM released a research report stating that the US semiconductor and semiconductor equipment sectors are entering the 3Q26 earnings season, with the bank maintaining a constructive but selective stance. Fundamentals have continued to improve over the past three months, benefiting from sustained AI infrastructure investment, persistent supply tightness across the broader semiconductor supply chain, and an expanding cyclical recovery in non-AI end markets, consistent with the sector's outperformance since the beginning of the year (SMH up 68%). The bank expects most companies under its coverage to deliver solid third-quarter results and provide constructive commentary for the fourth quarter and calendar year 2027, extending the “beat-and-raise” trend seen over recent quarters.

However, the bank believes this quarter's focus will be less on already well-understood demand strength and more on supply, including which bottlenecks are most severe, how long they will persist, and when new capacity additions may meaningfully ease tightness across different markets such as leading-edge foundry and memory. Overall sector positioning remains favorable, but supply-demand dynamics, pricing and earnings upgrade trajectories vary significantly across AI computing, custom silicon, networking, memory, semiconductor equipment and analog segments. The bank continues to selectively favor stocks with AI exposure, supply-constrained growth, pricing power and/or beneficiaries of the expanding cyclical recovery that can most directly translate into upward earnings revisions.

JPM's top picks remain Broadcom Inc. (AVGO.US) and Marvell Technology, Inc. (MRVL.US) . The bank also highlighted Overweight-rated NVIDIA Corporation (NVDA.US) and Advanced Micro Devices, Inc. (AMD.US) in computing; Micron Technology, Inc. (MU.US) and Sandisk Corporation (SNDK.US) in memory; Texas Instruments Incorporated (TXN.US) and Analog Devices, Inc. (ADI.US) in analog; as well as Applied Materials, Inc. (AMAT.US) , Lam Research Corporation (LRCX.US) and KLA Corporation (KLAC.US) in semiconductor equipment. Among small- and mid-cap stocks, it favors Astera Labs, Inc. (ALAB.US) , Amkor Technology, Inc. (AMKR.US) and MKS Inc. (MKSI.US) .

In GPU/XPU, persistent supply-demand imbalance continues to support further upward earnings revisions, while custom XPU and networking represent the fastest-growing layers in the AI stack. The market expects cloud capital expenditure to rise YoY by 97%, 47% and 9% in calendar years 2026, 2027 and 2028, respectively, while hyperscalers and neocloud providers remain structurally supply constrained. The bank expects commentary from NVIDIA Corporation (NVDA.US) , Advanced Micro Devices, Inc. (AMD.US) , Broadcom Inc. (AVGO.US) and Marvell Technology, Inc. (MRVL.US) to continue pointing toward upside potential for 2027 backlog and order visibility upgrades. Supply constraints in leading-edge process technology, HBM, advanced packaging and increasingly critical power availability remain the near-term growth bottleneck rather than demand. ASIC/XPU's share of accelerator shipments is projected to rise from about 32% in 2025 to an estimated 43% in 2026 and around 56% in 2027. Server CPU demand is accelerating significantly due to agentic AI inference workloads, with AMD EPYC continuing to gain share from Intel Corporation (INTC.US) . The bank sees room for AMD's server CPU revenue share to increase further from around 41% in 2Q26, with revenue CAGR exceeding 60% over the next few years. In PCs, rising memory-driven bill-of-materials inflation pressure is expected to drive 2026 shipment declines in the high single-digit to low double-digit percentage range YoY.

In memory, structural supply-demand tightness is expected to continue through 2028. Micron Technology, Inc. (MU.US) indicated that 2027 and 2028 will be materially tighter than 2026. JPM's global team estimates that even after despec adjustments, shortages in 2026, 2027 and 2028 will still be around 20%, 19% and 15%, respectively, with cumulative HBM shortages reaching 23 weeks by 2028. Micron's SCA count has increased to 26, covering more than 35% of revenue through 2030, while over 75% of fiscal 2027 output has already been locked in. HBM pricing in 2027 is expected to be “significantly higher” YoY. Data center SSD has become another major growth driver, with Micron's fiscal 4Q26 data center SSD revenue reaching about USD10 billion, up roughly 10x YoY. In semiconductor equipment (WFE), the bank's model forecasts YoY growth of 31%, 38% and 17% for 2026 through 2028, with foundry/logic and DRAM driving most of the upward revisions. Among large-cap names, the bank favors KLA Corporation (KLAC.US) , citing its relative underperformance since the beginning of the year and the market's underestimation of its leverage to the 2027 WFE cycle expansion from capacity additions into more advanced processes and rising process complexity. Samsung Electronics (005930.KS), SK Hynix (000660.KS) and Taiwan Semiconductor Manufacturing Company (2330.TW) were also mentioned in discussions related to memory and foundry/WFE. (da/ad)(Real-time Streaming US Stocks Quote; Except All OTC quotes are at least 15 minutes delayed.)