Bank of America analysts predict a two-phase semiconductor rally in 2025, with artificial intelligence chip stocks leading the charge in the first half before broadening to auto and industrial chipmakers later in the year. Led by analyst Vivek Arya, the team forecasts that AI semiconductor stocks will sustain strong momentum as Nvidia rolls out its highly anticipated Blackwell GPU, the next-generation chip that offers significant power improvements over the current Hopper architecture.
The analysts expect AI investments to continue doubling down on Blackwell deployment ramps, driven primarily by major US cloud customers including Google and Meta. These tech giants are seeking increasingly powerful tools to train and run sophisticated AI models, creating sustained demand for cutting-edge semiconductor technology. However, the analysts note that delivery uncertainties remain a lingering risk following initial shipment delays that have affected Blackwell’s rollout.
The semiconductor sector has already surged over 30% this year, propelled by AI chipmakers like Nvidia and Taiwan Semiconductor Manufacturing Company. Bank of America projects this momentum will continue, with semiconductor sales expected to reach $725 billion in 2025, representing a 15% increase. This marks a slight deceleration from the 20% growth anticipated for 2024, but still demonstrates robust industry health.
The analysts anticipate a strategic shift in investor sentiment during the second half of 2025. As AI stocks potentially peak amid concerns about returns on massive capital investments, attention is expected to pivot toward less-crowded auto and industrial chipmaker stocks. This transition would be catalyzed by global economic recovery, inventory normalization, and increased auto production.
“We see 2025 as a year of two different trends,” the analysts explained, noting that while they “continue to trust” AI investments through at least the second half of 2025, AI stocks could peak when investors grow concerned about tougher year-over-year comparisons in 2026 following two consecutive years of 100%+ annual growth in AI silicon. The projected shift toward auto and industrial semiconductors would mark a significant broadening of the rally beyond the AI-focused stocks that have dominated 2024.
Key Quotes
We see 2025 as a year of two different trends
Bank of America analysts, led by Vivek Arya, outlined their vision for the semiconductor market, predicting AI chips will dominate the first half before investor interest shifts to auto and industrial chipmakers in the second half of 2025.
We expect the AI investments driven by AI training and scaling of models to continue, doubling down on the NVDA Blackwell deployment ramps driven by cloud customers
The analysts emphasized their confidence in continued AI infrastructure spending, particularly highlighting how major cloud providers will drive demand for Nvidia’s next-generation Blackwell chips throughout the first half of 2025.
In AI we continue to trust.. at least till 2H25. AI stocks could potentially peak in 2H25E when investors start to get concerned about tougher YoY compares in 2026E following two years of 100%+ annual growth in AI silicon
Bank of America analysts provided a cautionary note about the sustainability of AI stock rallies, suggesting that extraordinary growth rates cannot continue indefinitely and that investor sentiment may shift as year-over-year comparisons become more challenging.
In the second half, we expect a pickup in auto/industrial semis as customer/channel inventories normalize (replenishment + easy comps), as well as a pick-up in global auto production
The analysts identified specific catalysts for the anticipated shift toward traditional semiconductor markets, pointing to inventory normalization and recovering auto production as key drivers for the second half of 2025.
Our Take
Bank of America’s forecast reveals a maturing AI semiconductor market approaching a critical transition point. While the Blackwell rollout will sustain near-term momentum, the predicted peak in late 2025 suggests investors are beginning to price in concerns about AI investment returns. This is particularly significant given the hundreds of billions of dollars tech companies have committed to AI infrastructure. The shift toward auto and industrial chips isn’t just about diversification—it signals a potential cooling of AI exuberance as the market demands proof of concept beyond impressive technical capabilities. The 15% projected growth for 2025, down from 20% in 2024, supports this moderation narrative. However, the fact that semiconductors are still expected to reach $725 billion in sales demonstrates that AI has fundamentally expanded the addressable market for chips, even as growth rates normalize. Investors should watch Blackwell deployment metrics closely as an early indicator of whether this timeline holds.
Why This Matters
This analysis from Bank of America provides critical insights into the evolving semiconductor landscape and signals a potential inflection point for AI investment strategies. The prediction of a two-phase market in 2025 suggests that while AI enthusiasm remains strong, investors should prepare for a diversification of opportunities within the chip sector.
The continued dominance of AI chip stocks through mid-2025, particularly driven by Nvidia’s Blackwell deployment, underscores how deeply AI infrastructure investments have become embedded in corporate strategy for major tech companies. The willingness of cloud giants to commit substantial capital despite delivery uncertainties demonstrates confidence in AI’s transformative potential.
However, the anticipated peak in AI stocks during the second half raises important questions about sustainability and return on investment in the AI sector. After two years of explosive 100%+ growth, the market may be approaching a maturation phase where investors demand concrete evidence of profitability from AI deployments. This shift could reshape how companies approach AI investments and force a more measured evaluation of AI’s economic impact. The broadening to auto and industrial chips also signals recovery in traditional semiconductor markets, suggesting a healthier, more balanced industry ecosystem.
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