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J.P. Morgan on Semis: AI ASICs, Memory and Semicap Lead 2026 Upswing — AVGO, KLAC Top Picks

Posted on by Eben@CANSLIM Research
Eben@CANSLIM Research's avatarEben@CANSLIM Research

J.P. Morgan expects the semiconductor industry to grow 118% year-on-year in 2026, with wafer fab equipment up 31%, as AI infrastructure spending, custom ASIC ramps and a memory pricing upcycle drive a sustained period of positive earnings revisions. In its Fall Series 2026 Update, the bank names AVGO, ADI, MRVL, MU and KLAC as its top large-cap picks, with NVDA, AMAT and LRCX also highly favoured, and ALAB, AMKR and MKSI leading its SMID-cap selection. The report argues the recent pull-back in semiconductor stocks is “highly constructive” given strengthening demand and supply fundamentals.

Key Takeaways

  • J.P. Morgan models the semiconductor industry growing +118% Y/Y in 2026 and +35% Y/Y in 2027, or +32% and +18% respectively excluding memory.
  • The bank forecasts WFE growth of +31% Y/Y in 2026 and +38% in 2027, with KLAC its top semicap pick on the best risk/reward.
  • J.P. Morgan estimates the custom AI ASIC market at ~$60–70B in CY26, growing at a 40–50%+ CAGR, with AVGO holding an estimated 80–85% share and MRVL 10–12%.
  • The bank forecasts DRAM blended pricing up ~250% in CY26 and NAND pricing up ~250% in 2026, with AI ASIC unit shipments exceeding GPU units by 2027.
  • Cloud capex estimates for CY26–28 stand at $953B / $1.41T / $1.54T, revised materially higher year-to-date, underpinning semiconductor demand.

Lead Analysis: What J.P. Morgan’s Fall Series 2026 Update Says

In a report titled “US Semiconductors and Semiconductor Capital Equipment — Fall Series 2026 Update,” J.P. Morgan analyst Harlan Sur and colleagues Mayur Ramdhani, Apoorva Kumar and Akanksh Chauhan argue that semiconductor and semicap stocks have outperformed the market over one, three, five, ten, fifteen and twenty years, and that long-term positive fundamental trends should continue. The SOX index has returned 84% over one year and 26% over five years, versus 15% and 11% for the S&P 500 over the same periods, while semicap equipment has returned 132% over one year.

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