Global semiconductor shipments tracked 10% above long-term demand trends in August on a three-month moving average basis, up from 7% above trend in July, according to Goldman Sachs analysis of Semiconductor Industry Association data.

Integrated circuit unit shipments, excluding memory, rose approximately 2% month over month in August — better than normal seasonal patterns. Most IC segments shipped at above-seasonal levels for the month.

The exceptions were discrete devices, microcontrollers, and digital signal processors, which posted worse-than-seasonal month-over-month unit declines. Goldman Sachs attributes this limited weakness to broad consumer electronics softness.

How far above trend is the market running?

On a three-month moving average basis:

• Overall shipments: 10% above long-term trend, versus 7% in July
• Analog shipments: approximately 10% above trend
• IC unit shipments excluding memory: up ~2% month over month in August, above seasonality

The acceleration matters because it marks a continued recovery from a prolonged downcycle. Goldman Sachs expects shipments to remain above trend in the medium term, given how long shipments ran below trend over the past four years.

Which stocks does Goldman Sachs prefer?

The firm continues to favor Microchip Technology (NASDAQ:MCHP), NXP Semiconductors (NASDAQ:NXPI), and Analog Devices (NASDAQ:ADI). Its screening logic targets companies that shipped furthest below trend during the downturn — in other words, the names with the largest recovery runway.

Microchip illustrates the pattern. The stock has gained 25% over the past six months, and 16 analysts have recently revised earnings estimates upward.

The company's fiscal first-quarter results backed that momentum. Microchip reported adjusted earnings of $0.76 per share on revenue of $1.48 billion, beating Wall Street forecasts of $0.70 per share and $1.46 billion. Revenue rose 13.2% sequentially and 38% year over year, with notable improvements in gross and operating margins. Management guided to growth in sales, margins, and profit for the upcoming quarter.

Analyst views diverge on valuation and inventory. Cantor Fitzgerald reiterated an Overweight rating with a $125 price target, citing strengthening trends in the analog semiconductor sector. UBS trimmed its target to $120 from $130 while keeping a Buy rating, citing inventory concerns. Shareholders also approved an amendment to Microchip's 2004 Equity Incentive Plan, authorizing an additional 12 million shares of common stock for issuance.

What could stall the recovery?

The soft spots in the August data — discretes, MCUs, and DSPs — all point to consumer electronics demand as the residual risk in the cycle. If that weakness spreads beyond consumer-exposed segments, the above-trend run-rate Goldman Sachs projects for the medium term could compress. For now, the analog and embedded suppliers that fell hardest in the downturn continue to lead the shipment recovery.