Fall 2025 Electronic Component Outlook: Momentum, Markets & Modernization

What’s Changed/What’s New?

1. Broader markets remain mixed, directionally improving and consistent with recent momentum pointing towards a moderate cyclical recovery across the industry. IP&E fundamentals appear to continue to outperform broader semiconductor.
2. High-level AI demand reads remain robust with growth projected to continue in CY26, driven by volume and content uplift.
3. Amphenol seen capturing a higher share of NVL content on GB200 through 3Q25. Estimating ~$10K per rack of tailwind that could reverse on GB300 as 2^nd sourcing for flyover cables ramps in 4Q and TE potentially ramps as a 2^nd backplane source in CY26.

Top 3 Channel Comments:

• Nvidia/AI customers tend to buy ahead. Normally, they want to have 15-20% of buffer in case of upside, but 50% buffer would be excessive. AI demand remain robust with no sign of slowdown. We are even projecting growth Q/Q in the seasonally slow 1Q.
• The original plan was for Nvidia to use bi-directional connectors for VR144, but during recent testing, Nvidia ran into signal integrity issues because each channel must handle reflections, echo cancellation, and very tight jitter budget at 224 per DP. As a result, Nvidia is shifting plans to double the number of differential pairs (DP) from 5184 to 10368, and the number of connectors in the backplane.
• We see a significant growth opportunity in CY26 driven by AI for Inference. We also hear from hyperscalers that next year spending for general-purpose compute will be very strong. We don’t think that strength has been well communicated in the supply chain because hyperscalers have been worried about securing enough optics-related supply.

Other Key Takeaways:

1. CY25 Nvidia rack reads unch. M/M with shipments tracking to 25-27K. Some connector/cable shipments tracking to 50-55K rack equivalents, creating a risk of digestion, but timing of that unclear given no indications of downtick in orders or NT expectations.
2. Connector/cable content likely more than doubling on Rubin vs. GB300, driven by recent design changes, including doubling of the backplane density and ~2x increase in compute tray content. CY26 Nvidia rack projected at 60k, with mix skewed to GB300.
3. Kyber content still TBD; directional change less clear relative to new Rubin content est; Nvidia seen exploring ways to reduce back/midplane costs via either MSA (multi-sourcing) or insourcing by using own IP – the latter viewed as challenging and less likely.
4. AWS Trainium demand reads still strong. Estimating Trainium 2.5 backplane content up incrementally (~$2K per rack). Trainium 3 content viewed as similar to Trn2.5. Trn3 Max rack density expected to double, implying a material step up in backplane content.
5. Auto reads stable M/M; 3Q tracking in-line, 4Q forecasted flattish, early 2026 outlook also flattish on expected EV shortfall in the West, flattish global Auto production forecast, uncertainty around UMSCA renewal and China tariffs.
6. TE still outperforming in China Auto on BYD ADAS program ramp up; TE sole sourced in ’25 with potential 2^nd source in ’26.
7. Industrial reads more mixed M/M, still directionally positive. EMEA reads downticking, America upticking, Asia stable.
8. Broader demand trends little changed M/M, still modestly positive. Order trends more mixed on Europe downtick with B2B ~1.

Conclusion:

IP&E fundamentals remain directionally positive, with AI momentum continuing to outperform. We see AI strength likely extending into 2026, while broader end-markets (Industrial, Auto, Medical, etc.) recovery appears at more measured pace. Despite perceptions of a slow recovery, we’re encouraged that the industry is largely shipping to consumption, with outperformance skewing toward companies with AI-linked, idiosyncratic growth drivers. We remain constructive on IP&E through the balance of 2025 and maintain a positive bias into 2026.

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