Infineon has posted a +14% gain following its calendar 4Q 2025 results, driven by an improved AI power outlook and broader strong outperformance by the semiconductor sector amid ongoing fears of AI disruption. However, despite broadly completed inventory destocking in the automotive chip segment (50% of CY25 revenue), a subdued sales outlook persists due to reduced global electric-vehicle subsidies and increasing Chinese competition, capping growth at low single digits this year.
With spot at all-time highs, trading at a historically full PE 25x valuation, we see attractive downside risks ahead of a potential rotation out of the crowded semiconductor trade, even more so following NVIDIA’s weakness despite the strong earnings beat. We seek to capitalise on rich implied volatilities (6M ATM IV 3YPc97, 6M Call Skew 3YPc83) and propose going long on Sep26 40 puts, financed by a Sep26 46/50 call spread costing 2.4% of the underlying. (Spot ref: 46.3, Fwd ref: 46.8)