Bank of America Securities maintains an optimistic outlook on the semiconductor sector for 2026.
The firm projects that capital expenditure in the artificial intelligence field will reach $1.2 trillion by 2030 and has selected six leading large-cap chip stocks for 2026, including Broadcom, Lam Research, and, of course, NVIDIA.
Talk of an AI bubble? Utter nonsense.
A recent research report from Bank of America Securities pours cold water on this pervasive narrative, shifting focus instead to the upside potential of chip companies.
In its market outlook for the coming year sent to clients, the firm anticipates that despite potential short-term volatility in the AI market, the year will ultimately finish strong, driven by continued data center construction and increased corporate investment in chip manufacturing and equipment.
Analysts believe the AI industry is currently at the midpoint of an 8 to 10-year development cycle, with 2026 representing a crucial juncture in this timeline. In the latter half of the cycle, technology companies are expected to persistently upgrade their IT infrastructure, and the deployment pace of AI-related workloads will further accelerate.
Bank of America Securities favors large-cap chip companies that combine market leadership with strong fundamentals, highlighting six specific picks it believes will fully benefit from the AI capital expenditure boom—a wave of spending forecast to climb to $1.2 trillion by 2030.
✅ Bank of America's Top Six Core Chip Stocks for 2026 (with year-to-date gains) ✅ NVIDIA: Year-to-date gain 41% ✅ Broadcom: Year-to-date gain 52% ✅ Lam Research: Year-to-date gain 146% ✅ KLA Corporation: Year-to-date gain 103% ✅ Analog Devices: Year-to-date gain 30% ✅ Cadence Design Systems: Year-to-date gain 6%
Although Broadcom, Lam Research, and KLA have significantly outperformed NVIDIA in terms of share price gains in 2025, Bank of America analysts still assert that NVIDIA remains the undisputed leader of the chip industry. They note that NVIDIA's current price-to-earnings ratio is only half its revenue growth rate, and the company holds several promising catalysts, indicating ample growth momentum.
Bank of America Securities assigns Broadcom a forward 2026 P/E multiple of 33 times, projecting its share price could reach up to $500 per share next year. This valuation is attributed to Broadcom's superior profitability among semiconductor companies and its impressive free cash flow generation.
Regarding Lam Research, analysts view its overall development trajectory as excellent—the chip manufacturing equipment it produces is a core necessity for wafer fabs. While Bank of America also cautions that tariff policies and inflationary pressures could pose short-term challenges, it still considers the company a strategic top pick for gaining exposure to the core AI manufacturing segment.
Furthermore, Bank of America Securities emphasizes that KLA Corporation boasts one of the highest gross margins in the chip sector, positioning it as one of the most stable investment options, and argues it deserves a higher valuation premium. Cadence Design Systems is listed as the preferred choice in the Electronic Design Automation (EDA) field, though analysts also warn that Sino-US trade tensions could present potential risks.
For Analog Devices, Bank of America acknowledges its robust free cash flow but simultaneously points out that an economic downturn could adversely impact its performance if customers in the automotive and industrial sectors reduce spending on high-performance chips.
Despite these risk considerations, Bank of America Securities remains highly optimistic about these six leading chip stocks, as well as select small and mid-cap chip names.
Bank of America Securities stated: 'We maintain a positive view on the semiconductor sector for 2026. While debates persist regarding the pace and profitability of AI investments, we believe the market generally underestimates the essential nature, offensive value, and defensive significance of AI capital expenditure for well-funded leading technology companies.'
