BofA Screens Six Top Chip Stocks for 2026 – Bullish on Semiconductor Sales Breaking $1 Trillion
Bank of America analyst Vivek Arya says the artificial intelligence (AI) boom is not cooling but expanding further.
While some AI skeptics cite high valuations as a reason to avoid the sector, Arya believes the industry is at the “midpoint” of a decade-long structural transformation led by Nvidia and Broadcom.
In his report titled “2026 Outlook: Bumpy but Hopeful,” Arya forecasts 30% YoY growth in global semiconductor sales next year — finally pushing the industry past the milestone $1 trillion annual sales level for the first time.
Arya particularly favors companies whose “moats can be quantified through margin structure.” Beyond Nvidia and Broadcom, he lists Lam Research, KLA, Analog Devices, and Cadence Design Systems as top picks for 2026.
“I often say investing in semiconductors is simple,” Arya said on a December 19 conference call. “You don’t really need sell-side analysts. Just rank all companies by gross margin and buy the top five — you won’t go far wrong.”
BofA estimates the addressable market (TAM) for AI data center systems will exceed $1.2 trillion by 2030, with a 38% CAGR. AI accelerators alone represent a $900 billion opportunity.
Despite these staggering numbers, markets remain cautious due to the enormous cost of building AI data centers. Per BofA’s report, a typical 1 GW data center requires over $60 billion in capex — roughly half directly on hardware.
Arya remains optimistic, viewing current spending as both “offensive” and “defensive.” In other words, tech giants have no choice but to invest to protect their existing empires.
Arya singled out Nvidia as operating “in a different galaxy.” YTD, Nvidia shares are up over 40%, with lofty valuations deterring some investors.
He countered that Nvidia should not be compared to traditional chipmakers: a single Nvidia GPU sells for ~$30,000 — far above ordinary chips.
While some worry Nvidia’s market cap has hit a ceiling, BofA notes its expected free cash flow over the next three years at $500 billion — making valuations “extremely cheap” when factoring growth.
Currently, Nvidia’s PEG (price/earnings-to-growth ratio) is ~0.6x — well below the S&P 500’s ~2x average. Arya said: “Valuation is always in the eye of the beholder.”
BofA’s other top pick — Broadcom — is up 52% in 2025. The company benefits mainly from supplying custom ASICs to hyperscalers like Google and Meta. As giants seek to reduce Nvidia dependence, they are increasingly turning to Broadcom.
Other Wall Street firms share the view. Goldman Sachs analyst James Schneider called Broadcom a key “arms dealer” in the AI boom. He noted deepening ties with Anthropic, OpenAI, and others leave further upside for the stock.
Despite the optimistic outlook, Arya acknowledges the road to $1 trillion will be “bumpy” and no stock is “zero risk.” His six 2026 picks are based on 70-75% market share in their respective fields.
“Look at leaders in any tech sub-segment — you’ll usually find the top player has this kind of share,” Arya concluded. “That’s actually the norm.”