BofA says chip stocks won’t peak until mid-2026, and that these 3 sub-industries will thrive until then

Nvidia’s stellar second quarter earnings report still doesn’t justify its current stock price, according to David Trainer.Sam Yeh/AFP/Getty Images

The semiconductor bull run will persist until mid-2026, based on previous cycles, Bank of America said.

This will benefit three major industry themes: cloud computing, cars, and complexity.

Nvidia, Broadcom, NXP Semiconductors, and KLA Corporation are among BofA’s top picks.

The semiconductor bull run is a long way away from petering out, with artificial intelligence momentum likely to carry it towards a mid-2026 peak, Bank of America said.

Ever since AI frenzy first took over markets, the semiconductor-tracking SOX index has shot past benchmark indices, and is already up 26% year-to-date. Compared to the S&P 500, it trades at a 4 to 5 times premium, the bank said.

Of course, a pullback could come from near-term triggers, such as the US election or monetary policy, but there’s good reason to remain bullish, analysts wrote on Monday.

That’s as the chip industry often undergoes 10 quarters of upside after experiencing a downcycle, a pattern that has just begun.

“The current upcycle started in late’23, so we are only in quarter 3, implying strength likely till mid-26E. However, chip stocks (SOX) change direction 6-9 months ahead of cycle inflection, so semis could potentially peak sometime around 2H25, or another year+ from now,” Bank of America said.

What’s more, the sector is expected to accelerate towards double digit annual sales growth in 2025, after last year’s inventory correction.

For investors trying to capture this rally, the note offered three investing themes that will benefit: cloud computing, cars, and complexity.

For the first, Nvidia is a top pick, as well as Broadcom. Bank of America sees major upside  potential for both, holding a $1,500 and $1,680 price objective on each.

At least for Nvidia, some of this stems from bullish outlooks on AI data center expansions, which provide strong demand for the firm’s hardware. Of today’s global IT spending, data center systems make up around 5%, or $260 billion, the bank…

..

Read More

Leave a Reply

Your email address will not be published. Required fields are marked *

Discover more from Investor News Blog Finance Exchange News

Subscribe now to keep reading and get access to the full archive.

Continue reading