Infineon Earnings: Emerging AI Opportunities Won’t Offset Its Inventory Corrections Elsewhere

Narrow-moat Infineon Technologies reported decent fiscal fourth-quarter earnings but provided investors with a gloomy outlook for the December quarter and a disappointing outlook for the fiscal year ahead. The forecast isn’t too much worse than those provided by peers in recent weeks, but it is yet another data point to suggest that no immediate recovery in demand is on the horizon. We cut our fair value estimate to EUR 43 from EUR 50. We admit that our cut would have been worse if not for the company’s rosy assumptions on power semis going into artificial intelligence servers. Shares still appear undervalued, even as the stock rose 3% on the earnings print, presumably out of AI optimism or because results weren’t as bad as feared by others.