Chip Stock Bull Market Narrative Still in "Main Uptrend"! 2026 Allocation Themes Focus on AI Chips, Semiconductor Equipment, and Optical Interconnect

The latest research report from Wall Street financial giant Morgan Stanley reveals that the "long-term bull market logic" for chip stocks remains intact, driven by unprecedented AI infrastructure demand and strong inventory reduction in traditional analog chips/MCUs. Chip stocks are expected to remain one of the brightest performers in the U.S. stock market next year, with NVIDIA (NVDA.US), Broadcom (AVGO.US), and Astera Labs (ALAB.US) topping the firm’s 2026 semiconductor picks. Concurrently, Bank of America analysts highlighted that the chip sector, which led the current U.S. stock market super bull run, is poised for continued gains, also favoring NVIDIA and Broadcom as long-term holds.

Bank of America noted that the global AI arms race remains in its "early-to-mid stages," urging investors to focus on industry leaders despite recent volatility. Beyond NVIDIA and Broadcom, the bank recommends semiconductor equipment leaders like KLA Corp (KLAC.US), Lam Research (LRCX.US), and Teradyne (TER.US). Both institutions agree that chip stocks, a core driver of the post-2023 bull market, are regaining global investor favor after recent sell-offs and could see another explosive rally in 2026.

Their 2026 semiconductor outlook identifies three key investment themes: 1. **AI Chip Leaders**: NVIDIA and Broadcom dominate this space, with demand fueled by AI GPU/ASIC clusters. 2. **Semiconductor Equipment Expansion**: TSMC (TSM.US), Samsung, and Micron (MU.US) are aggressively investing in advanced equipment to boost capacity. 3. **Optical Interconnect**: Critical for AI data centers, this segment faces tight supply and generational upgrades, supporting players like Astera Labs and Lumentum (LITE.US).

Morgan Stanley analysts noted, "AI semiconductors will dominate chip sector weightings for three consecutive years, with insatiable global demand for AI compute power as the key variable." While skeptical of some five-year projections, they expect 2026 to mark the midpoint of an 8–10-year upgrade cycle for AI-optimized infrastructure. Bank of America projects 50%+ growth in AI semiconductors, driven by high data center utilization, supply constraints, and adoption by cloud/sovereign clients.

The World Semiconductor Trade Statistics (WSTS) forecasts 26% growth in 2026, nearing a $1 trillion market, led by AI GPUs, HBM memory, and enterprise storage. Wall Street firms like Morgan Stanley and Loop Capital estimate the AI infrastructure investment wave could reach $3–4 trillion by 2030.

**Top Picks**: - **AI Chips**: NVIDIA, Broadcom (Morgan Stanley’s favorites); AMD (AMD.US) and Marvell (MRVL.US) rated cautiously. - **Semiconductor Equipment**: Applied Materials (AMAT.US), KLA Corp, Lam Research. - **Optical Interconnect**: Astera Labs, Lumentum, and Coherent (COHR.US), the latter pivotal for Google’s TPU clusters.

The semiconductor boom is far from over, with chip stocks poised for further upside.