GlobalFoundries Inc (NASDAQ:GFS) was downgraded to a 'Neutral' rating by Wedbush on Wednesday, with the firm lowering its 12-month price target to $40 from $42, citing a more prolonged semiconductor industry downturn and weaker near-term end-market conditions than previously anticipated.
In a note to clients, the analysts wrote that they continue to see a path toward improved fundamentals for the chipmaker over the longer term, but believe the timeline for key catalysts has been pushed out.
“While we continue to believe that GF has a path to a better future model, we also believe recent developments have elongated the timeframe around when those catalysts might play out,” the analysts wrote, pointing to softer demand trends and delayed policy-driven tailwinds.
Wedbush highlighted near-term risks to consumer electronics and handset demand, driven in part by higher costs of goods sold, particularly rising memory prices.
The analysts wrote that higher input costs are leading to increased device pricing, with original equipment manufacturers already cutting production in anticipation of weaker demand.
They also noted that recent checks in Taiwan suggest industrial and automotive demand remains subdued, with no clear signs of a near-term recovery.
Given that roughly half of GlobalFoundries’ revenue is tied to smart mobile devices and home and industrial IoT, the analysts wrote that this environment could limit upside and potentially pose modest risk to their 2026 sales outlook.
The firm also addressed GlobalFoundries’ strategic positioning as a US- and Europe-based manufacturer with limited exposure to China. Wedbush described this as a structural positive amid customer efforts to diversify supply chains, but cautioned that government-driven incentives for a more rapid shift toward domestic semiconductor production appear less imminent.
“We also believe the likelihood of a more dramatic shift incentivized by government actions has likely been pushed out,” the analysts wrote, pointing to a recent Federal Register publication indicating that tariffs on Chinese semiconductors would not be implemented until June 2027.
Despite the near-term headwinds, Wedbush maintained a constructive long-term view on the company. The analysts wrote that GlobalFoundries is still expected to deliver results near historically high margins this quarter, even with utilization levels below optimal levels, and said they see potential for higher margins over time as demand recovers and fabs become more fully utilized.
“Brighter future still probable, just further out,” the analysts concluded.