Jefferies Upgrades Four European Semiconductor Firms on Strong Order Growth

European semiconductor stocks gain momentum as industrial chip demand surges across China and automotive markets

Key Takeaways

• Jefferies upgrades European semiconductor giants with increased price targets for STMicroelectronics (€30 to €33), Infineon Technologies (€42 to €45), ams OSRAM (€11 to €13), and Melexis (€66 to €80) following stronger-than-expected Q2 order trends.
• Industrial chip segment shows double-digit growth in China driven by inventory depletion and targeted subsidies, with STMicroelectronics positioned to benefit from extensive involvement in industrial microcontrollers and analog products.
• Global semiconductor market projected to reach $697 billion in 2025 representing 11% year-over-year growth, with AI-related demand driving Infineon’s forecasted revenues from €600 million in FY25 to nearly €1 billion in FY26.

Introduction

European semiconductor companies are experiencing a significant revaluation as stronger-than-expected industrial and automotive demand drives order growth across the region. Jefferies has upgraded earnings estimates and price targets for major European chip manufacturers, citing robust recovery trends particularly in China’s industrial sector.

The upgrades affect four key players: STMicroelectronics, Infineon Technologies, ams OSRAM, and Melexis. According to Investing.com, the analyst firm identifies significant demand recovery driven by inventory depletion and targeted government subsidies.

Key Developments

The industrial chip segment demonstrates the strongest recovery momentum, with double-digit quarter-over-quarter order growth emerging from China. This growth stems from normalized inventory levels following previous corrections and increased government support for domestic manufacturing.

STMicroelectronics receives the most substantial upgrade, with Jefferies forecasting a dramatic turnaround from a 27.4% year-on-year revenue decline in Q1 2025 to 22.4% growth by Q1 2026. The company’s extensive involvement in industrial microcontrollers and analog products positions it to capitalize on the sector’s recovery.

Infineon Technologies benefits from sustained AI-related demand despite concerns over euro strength and potential tariff impacts. The German semiconductor giant shows no significant order weakness, with AI applications driving substantial revenue growth projections.

Market Impact

Price targets across the upgraded companies reflect significant upward momentum. STMicroelectronics sees its target increase 10% to €33, while Infineon’s rises 7% to €45. Ams OSRAM experiences the largest percentage increase, jumping 18% to €13, and Melexis receives a substantial 21% boost to €80.

Earnings per share estimates show consistent upward revisions across all four companies. STMicroelectronics’ 2025 and 2026 EPS estimates increase by 7% and 6% respectively, with the 2026 projection now 23% above consensus expectations.

The automotive sector continues driving demand despite previous inventory corrections. Order strength in both automotive and industrial segments exceeds expectations, particularly in the U.S. and Chinese markets.

Strategic Insights

The cyclical upturn reflects broader structural changes in semiconductor demand patterns. AI applications create sustained revenue streams for companies like Infineon, which projects AI-related revenues approaching €1 billion by FY26 from €600 million in FY25.

Supply chain normalization enables companies to capitalize on improving end-market demand. The combination of depleted inventory levels and stronger underlying consumption creates favorable conditions for revenue growth through 2025.

Geographic diversification proves crucial as companies benefit from recovery in multiple regions. China’s industrial subsidies and U.S. automotive demand provide complementary growth drivers that reduce reliance on single-market performance.

Expert Opinions and Data

Jefferies analysts emphasize the sustainability of current trends, expecting the cyclical upturn to continue through Q4 2025. The firm’s confidence stems from normalized inventory levels and strengthening end-market demand across key sectors.

Ams OSRAM’s turnaround story includes potential asset sales worth €500 million, including progress in selling the Kulim fab facility. These divestments may enhance stock re-rating as the company focuses on core competencies in industrial, automotive, and consumer segments.

Melexis demonstrates recovery from previous inventory corrections, with Jefferies anticipating 14.6% revenue growth for FY26. The company’s expanded content in body-comfort-safety applications and growing design wins in China support this optimistic outlook.

Conclusion

The semiconductor industry’s European segment demonstrates resilience and growth potential as order trends strengthen across industrial and automotive applications. Jefferies’ comprehensive upgrades reflect confidence in sustained demand recovery, particularly in China’s industrial sector.

The convergence of normalized inventory levels, government support, and robust end-market demand creates favorable conditions for European semiconductor companies. Current order strength suggests the cyclical upturn possesses both momentum and sustainability through the remainder of 2025.