Bank of America has dismissed concerns about an AI bubble, releasing bullish research that identifies six chipmaker stocks poised to capitalize on the ongoing artificial intelligence revolution. The investment bank’s analysis positions the AI market at the midpoint of an eight- to 10-year evolution cycle, with 2026 marking a critical juncture for continued growth.
BofA’s analysts predict that while the AI market may experience some volatility in the coming year, it will ultimately finish strong as data center buildouts accelerate and companies intensify their manufacturing and equipment spending. The firm forecasts that AI-related capital expenditure could reach $1.2 trillion by 2030, representing a massive investment opportunity for well-positioned semiconductor companies.
The bank’s top six AI chip stock picks include industry giants with impressive year-to-date performance:
- Nvidia (+41% YTD): Despite being outperformed by some peers, BofA maintains Nvidia as the undisputed industry leader, noting it trades at half its growth rate with a promising pipeline of catalysts
- Broadcom (+52% YTD): Valued at 33 times anticipated 2026 earnings, with a price target of $500 per share due to high profitability and impressive free cash flow
- Lam Research (+146% YTD): Positioned excellently due to producing equipment critical for chip fabrication, though subject to potential tariff and inflation pressures
- KLA Corporation (+103% YTD): Highlighted for leading profit margins among chipmakers and industry stability
- Analog Devices (+30% YTD): Recognized for high free cash flow, though vulnerable to economic downturns affecting automotive and industrial customers
- Cadence Design Systems (+6% YTD): Named top pick for Electronic Design Automation, despite risks from China trade tensions
BofA emphasizes that during the second half of this AI evolution cycle, tech companies will continue upgrading IT infrastructure and accelerating AI workloads. The analysts specifically favor large-cap companies that are high-quality sector leaders, believing the market underappreciates the “mission critical, offensive and defensive nature” of capex investments by the largest and best-funded tech companies.
Key Quotes
We remain constructive on chip stocks heading into 2026. While debates around the pace and profitability of AI investments will continue, we believe consensus under-appreciates the mission critical, offensive and defensive nature of capex investments being done by the largest and best funded tech companies.
Bank of America analysts made this statement in their note to clients, emphasizing their bullish outlook on semiconductor stocks despite ongoing market debates. This quote is significant because it reframes AI spending not as speculative bubble behavior, but as strategic necessity for major technology companies.
Our Take
Bank of America’s research represents a crucial counternarrative to bubble concerns that have periodically rattled AI-related stocks. The midpoint thesis is particularly insightful—suggesting we’re transitioning from infrastructure buildout to widespread deployment and optimization phases. The diversity of their picks beyond just Nvidia demonstrates sophistication in understanding the AI supply chain, from design automation (Cadence) to manufacturing equipment (Lam Research) to specialized chips (Broadcom). The $1.2 trillion capex forecast provides concrete validation for the AI infrastructure thesis. However, the acknowledged risks around tariffs, China tensions, and economic sensitivity reveal that even bullish analysts recognize significant headwinds. The emphasis on “mission critical” spending suggests AI has crossed the threshold from innovation experiment to business imperative, which historically marks the point where technology adoption accelerates rather than retreats.
Why This Matters
This analysis from Bank of America carries significant weight for the AI industry and investors, as it directly challenges the growing “AI bubble” narrative that has created uncertainty in technology markets. The bank’s positioning of the AI market at its midpoint suggests we’re only halfway through a transformative decade-long cycle, indicating substantial growth opportunities remain.
The $1.2 trillion AI capex forecast by 2030 underscores the massive infrastructure investments required to support AI development, benefiting the entire semiconductor supply chain. This matters for businesses planning AI adoption strategies, as it signals continued availability of increasingly powerful computing resources.
For workers and society, the sustained investment in AI infrastructure suggests continued job creation in semiconductor manufacturing, data center operations, and AI development. The focus on “mission critical” investments by major tech companies indicates AI is transitioning from experimental to essential technology, fundamentally reshaping how businesses operate. The emphasis on both offensive (growth-driving) and defensive (competitive necessity) AI spending reveals that companies view AI infrastructure as non-negotiable for future competitiveness, accelerating the technology’s integration across industries.
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Source: https://www.businessinsider.com/chipmaker-ai-stock-picks-to-buy-bofa-nvda-avgo-lrcx-2025-12