** J.P.Morgan says deal activity in the chip sector has slowed over the past several years given the macro environment, but it expects M&A to potentially pick up in 2025

** In 2024, the overall semiconductor cycle continued to slowly improve; however, diverging trends were observed between AI and non-AI semiconductor businesses - J.P.Morgan

** AI compute, networking and custom chip businesses have benefited from a strong AI infrastructure build-out, which has resulted in share price outperformance and a positive earnings trend - JPM

** Analog devices, microcontroller units and semiconductor capital equipment providers have underperformed on slower end-market recovery as concerns increase around softer demand and geopolitical uncertainty, which is, however, expected to improve in the second half of 2025 - JPM

** Demand for chip design software tools from Synopsys SNPS.O and Cadence Design Systems CDNS.O remains strong driven by rising chip complexity and strong chip design activity

** Strong AI server spending benefits Nvidia NVDA.O, Arm Holdings O9Ty.F , Advanced Micro Devices AMD.O, Marvell Technology MRVL.O and Broadcom AVGO.O

(Reporting by Priyanka.G in Bengaluru)

((priyanka.g@thomsonreuters.com;))