3 European Chip Stocks Poised for Growth

Kepler Cheuvreux maintains a constructive outlook on European semiconductor stocks, citing an ongoing upcycle and attractive valuations, highlighting Infineon, Nordic Semiconductor, and Besi as key picks. While Infineon's recent revenue and guidance fell below consensus, and Besi reported weaker bookings and soft Q3 guidance despite long-term optimism for hybrid bonding and potential for sales to double by 2028, Nordic Semiconductor is benefiting from a recovering consumer market. The firm underscores that execution, pricing, and customer phasing are critical determinants of future success for these companies.

Analysis

Investment firm Kepler Cheuvreux presents a constructive long-term outlook on the European semiconductor sector, asserting that the market is in an upcycle with attractive multi-year valuations, despite acknowledging near-term headwinds. The analysis highlights three key firms, each with a distinct profile. Infineon (IFNNY) received a 'Buy' rating with a EUR44 price target based on its strategic positioning, but this is tempered by its recent performance, where both its Q3 revenue of €3.59 billion and Q4 guidance of €3.6 billion fell below consensus estimates. In contrast, Nordic Semiconductor (NDSMF) appears to be capitalizing on current trends, earning a 'Buy' rating and NOK190 target due to a tangible recovery in consumer markets, evidenced by low-single-digit growth in smartphone volumes and mid-single-digit growth in PCs during Q2. The most nuanced case is Besi (BESIY), which, despite weaker bookings, soft Q3 guidance, and Kepler's own 2025-27 estimate cuts of up to 17%, maintains a 'Buy' rating and a EUR140 target. The optimism for Besi is rooted in a significant long-term catalyst: strong anticipated demand for its hybrid bonding technology, supported by Samsung's expected adoption in HBM4 and a potential for sales to double by 2028. This long-term view is reinforced by Morgan Stanley, which reiterated its 'Overweight' rating and raised its target to €190. Ultimately, the future performance across these names hinges critically on execution, pricing power, and the specific timing of customer technology adoption.

Key Decisions for Investors

• Investors should differentiate between the short-term operational headwinds seen at Infineon and Besi and the long-term secular growth drivers in the semiconductor upcycle.
• For Besi (BESIY), the current weakness in bookings and guidance may present a long-term entry point for investors willing to underwrite the significant growth potential from hybrid bonding adoption, which is forecast to materialize in late 2025 and beyond.
• Nordic Semiconductor (NDSMF) offers more immediate exposure to the recovering consumer electronics market, making it a potentially more suitable investment for those with a shorter time horizon seeking to capitalize on current cyclical tailwinds.
• Given Infineon's (IFNNY) recent underperformance against consensus, investors should closely monitor upcoming earnings reports for evidence of improved execution and stabilization before increasing exposure.