AI power and price hikes drive earnings upgrades for Infineon, with Jefferies raising the target price to €96

Overview

This report focuses on Infineon Technologies' AI power business, the cyclical recovery in automotive and industrial semiconductors, and the impact of price increases on earnings. Jefferies believes the company's AI power revenue is becoming an important contributor to total revenue and is likely to at least double to €3bn in FY27, supported over the medium to long term by vertical power delivery, CPU rack demand, SST, SSCB, and volume ramp-up of GaN solutions. The report reiterates a Buy rating and raises the target price from €75 to €96.

Core views

The core views are: first, AI power demand, customers' shift to vertical power delivery, and new capacity from Dresden will drive rapid growth in AI power revenue; second, price hikes for silicon MOSFETs and other products will improve revenue and margins from FY27 to FY28; third, automotive and industrial semiconductors are likely to enter an upswing cycle alongside restocking and price improvement; fourth, a higher AI data center revenue mix can support a structural re-rating of Infineon relative to peers.

Analysis framework

The report uses a combination of earnings forecast upgrades, segment margin modeling, scenario-based target prices, and relative peer valuation. Jefferies derives the €96 target price based on FY27E EPS and a 33x P/E multiple, and uses downside, base, and upside scenarios to assess the impact of changes in the AI investment cycle, automotive/industrial demand, exchange rates, and valuation multiples on the share price.

Methodology notes

• Valuation methodP/E relative valuation

  Derives the target price using FY27E EPS and a 33x P/E multiple.

  The €96 target price is based on 33x FY27E P/E, about a 15% premium to Infineon's analog/power discrete peers; the report argues this premium is supported by the rapid increase in AI data center revenue mix and historical premium levels.

• Valuation cross-checkEV/EBITDA reference

  Uses EV/EBITDA multiples as a supplementary check on scenario target prices.

  The base case corresponds to about 17.5x EV/EBITDA; the downside case of €54 corresponds to about 13.6x EV/EBITDA; the upside case of €115 corresponds to about 18.7x EV/EBITDA.

• Scenario analysisDownside / base / upside scenarios

  Builds a target price range through changes in demand, pricing, margins, and valuation multiples.

  The downside scenario reflects a weaker AI investment cycle, continued destocking in automotive and industrial supply chains, and valuation pressure; the base case assumes AI power and cyclical recovery progress as expected; the upside scenario assumes a stronger-than-expected recovery in automotive and industrial demand, significant price upside, and continued re-rating of the analog sector.

• Earnings forecastConsensus comparison

  Compares Jefferies' forecasts with market consensus.

  Jefferies' FY27 and FY28 EPS forecasts are both 11% above consensus, mainly driven by AI power revenue growth, MOSFET price hikes, and improved PSS margins.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Infineon Technologies (IFX.GR)

  The report's core covered name, with Jefferies assigning a Buy rating and including it as a Franchise Pick.

  Strengths

  The company is a leading supplier of discrete power semiconductors and the No.1 supplier of automotive semiconductors; it holds leading share across AI power, MOSFETs, MCUs, IGBTs, sensors, and automotive electrification product portfolios.

  Weaknesses

  AI power growth is still constrained by capacity ramp-up; automotive and industrial end demand is cyclical; current valuation is already near elevated multiples and is sensitive to earnings upgrades and the durability of AI demand.

  Comparison

  The target price uses 33x FY27E P/E, about a 15% premium to peers; the report believes this premium is in line with historical levels and is supported by the AI data center revenue mix rising from about 5% in FY26 to 15%+ in FY27.

  Risks

  A weaker AI investment cycle, declining automotive demand, industrial restocking falling short of expectations, a sharp strengthening of the euro, tariffs, and localization in China leading to market share pressure could all weaken revenue, margins, and valuation multiples.

Key data

• Rating actionReiterate Buy, raise target price to €96The previous target price was €75.
• Current price€81.11The previous trading day's closing price disclosed in the report.
• Base-case target price€96, about +18%Based on FY27E P/E of 33x and EV/EBITDA of 17.5x.
• Downside target price€54, about -33%Based on FY27E adjusted EPS of €1.96, P/E of 28x, and EV/EBITDA of 13.6x.
• Upside target price€115, about +42%Based on FY27E EPS of €3.5, P/E of 33x, and EV/EBITDA of 18.7x.
• AI power revenue FY26Up more than 100% to €1.5bnCompany guidance indicates FY26 AI power revenue growth is supported by demand and the shift to vertical power delivery, but is still constrained by capacity.
• AI power revenue FY27At least doubles to €3bnJefferies expects growth to be driven jointly by new capacity, remaining customers shifting to vertical power delivery, and price increases.
• AI data center revenue FY27About €3.5bnThe report believes CPU racks and agentic AI demand could provide additional upside.
• PSS segment margin16% in FY25, 24% in FY26E, rising to 34% in FY27EMainly driven by double-digit price hikes for silicon MOSFETs and tight supply-demand conditions.
• EPS forecast vs. consensus11% higher in both FY27 and FY28Earnings upgrades are an important foundation for the target price increase.
• AI-related power semiconductor revenue per kilowattRises from $175 to $250Assumes GPU/ASIC customers complete the transition to vertical power delivery.
• AI data center revenue mixAbout 5% in FY26, expected at 15%+ in FY27The increase in mix is seen as a key factor supporting a structural re-rating.

Impact & implications

If Jefferies' view plays out, Infineon's investment narrative may shift further from that of a traditional cyclical automotive and industrial semiconductor stock toward an AI data center power semiconductor growth stock. A higher AI power revenue mix, structurally high-margin MOSFETs, and the restocking cycle together could drive earnings upgrades and sustain a valuation premium through FY27 to FY28; however, if AI capex slows, automotive demand weakens, or localization pressure in China intensifies, the re-rating thesis could be impaired.

Risks

• A weaker AI investment cycle leading to lower-than-expected orders for data center power semiconductors.
• A significant decline in global or Chinese auto demand, causing the cyclical recovery in automotive semiconductors to stall.
• Continued inventory correction in automotive and industrial supply chains in 2026, dragging on revenue recovery and pricing improvement.
• Valuation multiples peaking and cyclically compressing, offsetting the share price support from EPS upgrades.
• A sharp strengthening of the euro or other macro factors affecting revenue growth and margins.
• Tariff headlines, localization in China, and potential market share losses may weigh on valuation.

What to watch

• Whether AI power demand and customer engagement continue to strengthen.
• The progress of capacity ramp-up at the Dresden Smart Power wafer fab after it comes online in July.
• The magnitude of follow-on price increases for silicon MOSFETs and other products, and customer acceptance.
• Monthly auto demand in China and the pace of global automotive/industrial restocking.
• The impact of EUR/USD exchange rate changes on revenue and margins.
• Whether quarterly results, management guidance, and FY27/FY28 earnings forecasts continue to be revised upward.
• Signs of volume ramp-up from 2028 onward for new solutions such as SST, SSCB, and 800V GaN intermediate bus converters.