Bank of America remains confident in the future growth of the artificial intelligence industry. As a result, the investment bank named five semiconductor chip stocks it remains bullish on in a note Friday.
The bank has a preference for vendors serving the cloud infrastructure market, highlighting names including NVIDIA (NASDAQ:NVDA), Broadcom (NASDAQ:AVGO), Marvell Technology (NASDAQ:MRVL), AMD (NASDAQ:AMD), Micron Technology (NASDAQ:MU) and their associated supply chain of semi-cap equipment and design tool suppliers.
Following earnings reports from key US hyperscalers Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT) and Meta Platforms (NASDAQ:META), analysts see a meaningful upside to 2024 capital expenditure, mostly driven by the buildout of AI infrastructure.
"Our top 5 AI beneficiaries listed above also happen to be trading at a compelling 24x average CY25E PE (range 15x-28x) after the recent correction, suggesting enhanced Buy opportunity as we get past the usual earnings season volatility discussed recently," said BofA.
The upfront AI buildout cycle is seen lasting at least three to four years, with the most favorable chip stock upside potential during the first three years, followed by benefits moving toward other enterprise verticals taking advantage of AI's productivity gains.