JP Morgan has declared the European semiconductor sector to be in a sweet spot, with inventory levels pointing to conditions conducive to an upcycle and no indication of near-term risks beyond broader macroeconomic uncertainty.
The bank's quarterly inventory review found that semiconductor inventory rose 3.9% quarter on quarter in absolute terms during the first quarter of 2026, reaching 149 days compared with 139 days at the end of the fourth quarter and 138 days at the end of the third quarter.
On a seasonally adjusted basis, overall days of inventory stood 0.6% below normal levels, measured against a three-year seasonal average, as the first quarter ended.
That was a slight increase from the 2.1% below average recorded at the end of the fourth quarter, but JP Morgan said the data still showed no negative trend.
The bank acknowledged that 149 days of inventory is substantially higher than pre-pandemic averages, a point likely to draw pushback from sceptics.
However, it argued that the comparison is misleading because the geopolitical and supply chain environment has fundamentally changed since before the pandemic, meaning semiconductor suppliers now hold structurally higher inventories driven by customer demand for greater security of supply.
Notably, inventory in the key distribution segment, a bellwether for broader demand trends, remains well below seasonal norms, which JP Morgan views as a particularly encouraging signal.
The overall picture suggests an environment where restocking could support further upside rather than one where excess inventory threatens to weigh on pricing and orders.