Bank of America is bullish on AI capital spending: Revises market forecasts upward and names 5 top picks for chip stocks

The AI ​​craze continues to sweep the global semiconductor market. Bank of America Securities is optimistic that AI capital expenditures will remain strong in the next few years and has significantly revised up its AI data center market forecast. With the arrival of the fourth quarter, Bank of America semiconductor analyst Vivek Arya also announced the top five preferred chip stocks with short-term catalysts, including Huida, Intel, Micron, Marvell and Colin R&D.

Vivek Arya, a semiconductor analyst at Bank of America, pointed out that Bank of America has significantly increased the potential market size of AI data center systems from 2026 to 2030 from the original estimate of US$1.8 trillion to US$2.2 trillion, and the annual growth rate forecast has also been increased from 33% to 40%.

He believes that the accelerated adoption of agent AI tools by consumers and enterprises, coupled with competition between public and private AI laboratories, and the still limited supply of chips, will form a positive cycle to support AI spending in the next few years. Even if the most advanced AI models add security protection measures, they may increase rather than reduce computing requirements, while further shifting computing power requirements from training to faster-growing AI inference.

From a valuation perspective, the current estimated price-to-earnings ratio of the Philadelphia Semiconductor Index is about 21 times, which is about 12% lower than the median of 24 times since the inception of ChatGPT. Compared with the potential growth rate of the chip industry's profits of more than 40%, Bank of America believes that the valuation is still attractive.

In addition, historical experience is also beneficial to chip stocks in the fourth quarter. Arya pointed out that between 2010 and 2025, the fourth quarter and the first quarter of the following year were the two best quarters for holding chip stocks, with the median excess return relative to the S&P 500 Index reaching about 3 to 5 percentage points.

The five top choices listed by Bank of America this time are Huida, Intel, Micron, Marvell and Lam Research. In addition, we continue to be optimistic about AMD, Applied Materials, Analog Devices, and ON Semiconductor, and maintain a buy rating on Broadcom.