JPMorgan upgrades rating, Infineon’s stock soars due to AI power supplies and automotive recovery prospects

Investing.com - Infineon Technologies’ stock rose over 3% on Friday, after JPMorgan upgraded the German chipmaker’s rating from “Neutral” to “Overweight” and raised the target price from €40 to €48, citing increasing exposure to AI power demands and signs of stabilization in the automotive market.

As of March 19, 2025, the stock traded at €37.14, with the new target price implying approximately 29% upside. JPMorgan set the target date for the price target at December 2027, applying a 16.4x P/E ratio to the upgraded FY2028 EPS estimate of €2.92.

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“Market sentiment is so negative that we believe this is a good buying opportunity before the automotive market potentially improves in FY2027. AI power supplies and pricing will support the stock in the short term,” said the analyst.

Infineon has guided FY2026 AI power supply sales of €1.5 billion, rising to €2.5 billion in FY2027. JPMorgan noted that the company’s supply in this market is constrained, and has accelerated about €500 million of FY2026 investments to convert IGBT capacity into leading sub-100V MOSFET production for AI, speeding up capacity expansion for its Dresden power and analog modules before FY2027.

The broker stated that tensions in the AI MOSFET market are spilling over into non-AI products, giving Infineon pricing power in its Power & Sensor Systems division.

Reportedly, price increases for power switches and PMICs have been communicated to customers, mainly smaller Chinese buyers, effective from April 1, 2026. JPMorgan’s estimate for FY2026 PSS division profit margin is 21.3%, 111 basis points above Vara’s consensus, with the gap widening to 399 basis points at 29.1% in FY2027.

In automotive, JPMorgan acknowledged ongoing headwinds. According to the bank’s report, S&P Global Mobility forecasts a decline in light vehicle production in North America, China, Japan, and South Korea in 2026.

The market currently expects only a 2% compound annual growth rate for Infineon’s automotive division in 2026-2027, down from about 10% a year earlier. JPMorgan said excess automotive inventory should be cleared by the second half of 2026, with software-defined vehicle revenues expected to accelerate from the second half of 2026, while STMicroelectronics has indicated it is losing market share in automotive MCUs to Infineon and Renesas.

JPMorgan raised its FY2026 revenue estimate by 0.5% to €15.84 billion and FY2027 by 2% to €18.47 billion. Adjusted EPS estimates were increased to €1.57 for FY2026 and €2.40 for FY2027, up 6.3% and 4.2%, respectively, from previous estimates. According to JPMorgan, the group’s division profit margins are expected to be 18.8% in FY2026, rising to 23.6% in FY2027, and reaching 26.3% in FY2028.

The revised forecasts do not include the pending acquisition of AMS-Osram’s non-optical sensor assets, which is expected to close in Q3 FY2026. JPMorgan noted that including this could add 1-1.5 percentage points to FY2027 revenue and division profit estimates.

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