Semiconductor Sector Earnings Expectations Outpacing Company Guidance

J.P. Morgan Chase released a research report analyzing the semiconductor sector's earnings expectations and stock prices. The study found that market expectations for companies like ON Semiconductor (ON), Applied Materials (AMAT), AMD, Arista Networks (ANET), Coherent (COHR), Cisco Systems (CSCO), Lumentum (LITE), SanDisk (SNDK), and Western Digital (WDC) are generally higher than their company guidance.

For ON, J.P. Morgan's buy-side survey shows that about 60% of respondents expect the company to slightly raise its 2026 AI revenue target from $500 million. However, market expectations for ON's AI business are extremely low, and the stock price has already fallen by roughly 25%. This is seen as an overreaction by some investors.

J.P. Morgan also found that new long positions and short covering have increased significantly in the past month, with ON shifting from net short to slightly net short. The implied volatility of ON's earnings is 7.5%, which suggests that market expectations are not pessimistic.