AI craze sweeps over the simulation chip! Infineon boosts investment in data centers, aiming for "10-fold growth in AI revenue".

One of the world's largest analog chip manufacturers, Infineon Technologies AG, based in Germany, announced strong quarterly performance data and future performance outlook on Wednesday. The management of Infineon stated in their outlook that they will increase their investments in technology and production capacity aimed at large-scale AI data centers, in order to capitalize on the exponential growth in demand for artificial intelligence computing solutions globally, leading to revenue growth. Currently, Infineon plans to invest approximately 27 billion euros (around 32 billion US dollars), higher than the institution's previous expectations and analysts' consensus forecast of around 22 billion euros. Infineon stated that overall revenue in the data center sector is expected to increase from approximately 1.5 billion euros in the current fiscal year, accounting for around 10% of total revenue, to at least 2.5 billion euros by 2027. "This will essentially mean a tenfold increase in our AI data center-related sales within just three years," said Infineon CEO Jochen Hanebeck during the performance conference call on Wednesday. Amidst strong performance and future outlook, Infineon's stock price rose by 4.2% at the opening of the Frankfurt stock market. The latest strong performance and future outlook from Infineon further reinforces the recovery trajectory in analog chip demand led by companies such as Texas Instruments Incorporated, STMicroelectronics NV ADR RegS, and NXP Semiconductors NV, as the AI data center construction processes led by tech giants like Alphabet Inc. Class C, Microsoft Corporation, and Meta are in full swing. The strong performance of both Texas Instruments Incorporated and Infineon, as well as the recent record highs in the stock price of the dominant player in the analog chip sector, Texas Instruments Incorporated (TXN.US), underscore the unprecedented wave of AI-driven demand that is transitioning smoothly from AI chips and storage chips to analog chips, thereby driving the performance of leaders in the analog chip sector such as Texas Instruments Incorporated, Analog Devices, Inc., Infineon, and NXP Semiconductors NV towards a strong recovery trajectory. In terms of overall revenue data, Infineon reported a total revenue for the first quarter of the 2026 fiscal year ending December 31 of approximately 3.66 billion euros, a 7% increase year-on-year, slightly higher than the average analyst estimate of around 3.62 billion euros. The adjusted operating profit margin was approximately 17.9%, higher than the average analyst expectation and the recent upward revisions of 16.8%. The long-term revenue from the company's automotive business, which had been in a slump, was also slightly higher than the average analyst expectation, reaching approximately 1.8 billion euros. In other core performance indicators, Infineon reported an operating profit of approximately 256 million euros for the first quarter, a 5% increase year-on-year, slightly higher than the average analyst expectation. The adjusted earnings per share for the first quarter were approximately 0.35 euros, higher than the strong recovery seen in the same period last year, which was 0.33 euros, and also higher than the average analyst expectation. In a statement, the company cited the CEO's comments, saying, "At a time when other markets are relatively sluggish, the demand for AI data centers is very active, bringing us an exceptionally strong tailwind cycle." The strong rise in demand at the AI data center level is helping Infineon address its long-term weak automotive chip business, which has historically been its largest business segment, accounting for about half of total sales, but has been faltering since the end of 2022. Investors have been waiting for a recovery in these more mature chip businesses. The revenue decline in the analog chip sector in the previous quarters was mainly driven by long-term weak demand, particularly from automotive chip customers who have been digesting inventory built up during the COVID-19 supply shortage period. In November of last year, the Infineon management had stated that the sales data related to data centers in 2026 would be twice that of 2025, following a threefold increase in the previous year. Infineon's strong performance reinforces the global recovery trajectory in analog chip demand To further diversify their chip business, Infineon stated on Tuesday evening that they have agreed to acquire AMS Osram's automotive, industrial, and medical sensor business for 673 million US dollars in cash. These types of sensors are used in various detection fields to convert signals such as motion and sound into data, and are applied in vehicles, health trackers, and Infineon's focus on future growth engines, such as human-shaped Siasun Robot & Automation. This transaction will be financed through additional debt and is expected to bring in approximately 230 million euros in sales in the current calendar year. In terms of market expectations for performance, the company's management stated that revenue for the current period is expected to be around 3.8 billion euros, slightly higher than the average analyst estimate, further reinforcing the recovery trajectory in analog chip demand led by giants like Texas Instruments Incorporated. Infineon expects the adjusted operating profit margin for this quarter to be in the high growth range of 15% to 20%, which is essentially consistent with the average analyst estimate of 17.5%. The company reiterated its outlook given in November last year for achieving a "moderate pace of revenue growth in the fiscal year ending September 2026." Senior analysts at Citigroup, Andrew Gardiner, among others, commented on Infineon's financial report, stating, "The cyclical strong recovery is evident in Infineon's performance, but like other analog chip peers, the recovery is slower and varies by end-market compared to American chip peers such as NVIDIA Corporation, Broadcom Inc., and Micron. For analog chip manufacturers like Infineon, the clear growth prospects closely related to artificial intelligence are undeniably a long-term positive factor." Infineon's CFO, Sven Schneider, mentioned that the analog chip technology serving AI data centers has "huge growth potential" and that "this number is increasing quarter by quarter; for us, this is one of the largest growth drivers in the company's history." Schneider said during the performance conference. Similar to the business of the global analog chip giant, Texas Instruments Incorporated, Infineon has a "analog/power-related" chip DNA, with their business predominantly concentrated on the essential analog and power devices in data centers/industrial/automotive sectors. As power consumption in AI data centers rises, the demand for power conversion, power protection, monitoring, and driving devices increases. Therefore, both analog chip companies have been emphasizing demand driven by data centers and AI-related needs recently in their public narratives. However, in terms of analog chip product forms and technical stacks, Infineon is more inclined towards "power devices/modules," while Texas Instruments Incorporated leans more towards "analog ICs (signal chains)." Infineon's "analog/power" is closer to core power electronic devices: their "Power" analog chip product portfolio emphasizes a broad spectrum of Si/SiC/GaN, covering MOSFETs, IGBTs, power modules, drivers, protection, and various power conversion solutions. In comparison, Texas Instruments Incorporated focuses on a "broad-spectrum analog IC (power management + signal chains) + embedded" analog/power chip product platform, with a strong emphasis in the analog field on "signal chains + board-level power management." The "chip demand frenzy" sparked by AI has finally spread from AI chips and storage chips to the analog chip sector The recent strong performance and positive outlook on revenue from Infineon, Texas Instruments Incorporated, and other analog chip giants, as well as the strong performance reported by Infineon, all indicate that the expected market trend of "the booming construction of AI data centers driving a strong recovery in analog chip demand" is unfolding in the chip industry. Under the unprecedented AI wave, the demand brought about by AI training/inference is transitioning smoothly from "compute chip essence (GPU/ASIC/HBM)" to a more broad "power and signal chain (power + analog/mixed-signal)" domain, and this transition is accelerating significantly. Infineon's recent disclosure of raising its investment plan for the fiscal year to approximately 27 billion euros from around 22 billion euros and expecting the AI data center-related revenue scale to increase from about 1.5 billion euros to 2.5 billion euros by 2027, highlights the underlying logic of the AI data center demand providing a strong "tailwind cycle" amidst a weakened automotive cycle. At the same time, Texas Instruments Incorporated's optimistic forecast range indicates that major customers have fully absorbed the mountain of analog chip inventory accumulated during the COVID-19 pandemic and have started placing large orders again, with core growth mainly driven by AI data center analog chip business. Texas Instruments Incorporated CEO Haviv Ilan stated during the performance conference call with analysts that fourth-quarter orders had significantly increased, particularly from AI data centers, with the order growth rate being the strongest, "The market has been tight, and we just need to see how the results unfold." Ilan stated, citing a 70% revenue growth in the data center business unit of Texas Instruments Incorporated in the fourth quarter ending December. The chip demand frenzy brought about by AI is expanding from "compute chip essence (GPU/ASIC/HBM)" to a more broad "power and signal chain (power + analog/mixed-signal)" domain, and this expansion is accelerating significantly. Infineon's increased investment plan and Texas Instruments Incorporated's better-than-expected outlook for the first quarter explicitly list the demand brought about by the investments in AI data centers as a driving factor. The market interprets this data as "the analog chain beginning to reap the super dividends of AI infrastructure." The logic of analog chips riding the craziness of AI computing infrastructure construction is straightforward: under the AI training/inference system, the "power consumption per rack" has reached a historic new level, forcing power architectures to upgrade (from 48V to higher voltage HVDC). As a result, the semiconductor content of power devices and power management faces nonlinear escalation across the entire chain: the efficiency and thermal design constraints of AC/DC and DC/DC become more stringent, the multi-level conversion from 48V (or higher voltage) to point loads (<1V) becomes more complex, and the steep transient currents of GPUs/CPUs push up the requirements for power levels (FET/power modules/drivers), multiphase controllers, hot-swappable/electronic fuses, isolation and current/voltage sensing, clock and high-speed signal conditioning in various sub-sectors. Infineon is more inclined towards the "hardcore increment in power-side" (power semiconductors and power solutions required for data center power, distribution, and board-level conversion), thus emphasizing a strategy of driving strong analog product demand through AI training and inference, while leveraging the weak automotive combination. On the other hand, Texas Instruments Incorporated is more inclined towards "board-level power management + signal chains": Texas Instruments Incorporated breaks down key components of large-scale AI data center computing architecture into multiple phase controllers/power stages/point load converters and hot-swappable eFuse solutions tailored for 48V architecture. In essence, they are offering a combination "along the power path" and providing solutions such as hot-swappable eFuses for 48V architecture. This essentially means they are collecting rent "by wattage and by phase" on AI servers/switches/accelerator cards. (Translation provided by Wonder)