Bank of America's 2025 Semiconductor Outlook: AI Boom and Shifting Market Dynamics

Bank of America names Nvidia and these semiconductor stocks top picks for 2025

Bank of America is standing by Nvidia and some other key semiconductor players in 2025 even after another strong year for the sector. "In the first half, [artificial intelligence] investments and NVDA Blackwell deployments driven by US cloud customers sustain momentum in AI semis, wrote Vivek Arya. "However, in the 2H, interest could shift to less-crowded auto/industrial chipmakers on inventory replenishment and pick-up in auto production assuming a global economic recovery." Semiconductor stocks are on pace for another winning year as AI investments ramp up and show no signs of easing. Nvidia is on pace to finish the year with a 172% gain, while Broadcom shares have nearly doubled, hitting a fresh high last week. Looking ahead, Arya forecasts that semiconductor sales will grow 15% to $725 billion next year, while memory sales should grow 20% year over year and outpace nearly 8% growth this year. Wafer fab equipment sales, however should grow a modest 5% due to China restrictions. "Despite the crowded nature of AI stocks, we still see a continued 'arms-race' between cloud ... service providers, [total addressable market] expansion into enterprise on-premises and sovereign deployments, and continued pace of innovation in training ... and inference," he wrote. "However, 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." Beyond AI-leaders Nvidia, Broadcom and Marvell Technology , Arya anticipates significant tailwinds for flash-memory equipment leader Lam Research as capital expenditures recover. China export restrictions, however, present a near-term risk. AVGO YTD mountain Broadcom shares this year "We do expect [wafer fab equipment] to pick-up double-digit growth in 2026/27 assuming continued demand for leading edge logic/memory and advanced packaging," Arya wrote. "Our top semi-cap pick [is] LRCX, but also continue to like KLAC , AMAT ." The firm also names On Semiconductor as a potential winner in the second half. Shares have underperformed this year, slumping more than 21%.

'In AI we trust': Bank of America highlights 6 key chip stocks to own for 2025 By Investing.com

Investing.com -- Bank of America (NYSE:BAC) outlined its 2025 semiconductor outlook on Monday, spotlighting six chip stocks it recommends for investors in the coming year. The bank forecasts a 15% increase in semiconductor industry sales to $725 billion in 2025. This growth, although robust, is projected to be slower compared to the 20% growth seen in the current year. BofA anticipates memory sales to rise by 20% in 2025, following a 79% year-over-year increase in 2024, with core semiconductors, excluding memory, expected to grow by 13%. "We see 2025 as a year of two different trends. In the first half, AI investments and NVDA Blackwell deployments driven by US cloud customers sustain momentum in AI semis," analysts led by Vivek Arya said in a note. "However, in the 2H (second half), interest could shift to less-crowded auto/industrial chipmakers on inventory replenishment and pick-up in auto production assuming a global economic recovery." BofA's top picks include leaders in AI such as NVIDIA (NASDAQ:NVDA), Broadcom (NASDAQ:AVGO), and Marvell Technology Inc (NASDAQ:MRVL). "In AI we continue to trust.. at least till 2H25," analysts said. Furthermore, the firm identified Lam Research (NASDAQ:LRCX) as a flash-memory tool leader poised for capital expenditure recovery and impact resolution in China. Auto and electric vehicle (EV) leader ON Semiconductor (NASDAQ:ON) is highlighted for its potential cyclical recovery in the second half of 2025, and Cadence Design Systems Inc (NASDAQ:CDNS) is noted for its resilient double-digit growth, especially as the AI hardware cycle decelerates in the latter half of the year. The report also includes rating changes for smaller mid-cap stocks. Advanced Energy Industries (NASDAQ:AEIS) has been upgraded to Buy from Neutral, and Ambarella (NASDAQ:AMBA) has been raised to Neutral from Underperform due to expected growth acceleration. On the other hand, Microchip Technology (NASDAQ:MCHP) has been downgraded to Underperform from Neutral, with analysts citing a "lack of catalysts." Moreover, BofA recognizes the potential in small to mid-cap stocks such as Coherent (NYSE:COHR), MACOM Technology Solutions (NASDAQ:MTSI), and Ceragon Networks (NASDAQ:CRNT), especially as growth extends to networking and optics sectors beyond just computing. "Despite the crowded nature of AI stocks, we still see a continued "arms-race" between cloud service providers, TAM expansion into enterprise on-premises and sovereign deployments, and continued pace of innovation in training and inference (agentic AI)," analysts continued. "However, 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."

Nvidia And 5 Other Stocks Are Analyst's Top Semiconductor Picks For 2025, Sees 2 AI Trends - Broadcom (NASDAQ:AVGO), Cadence Design Sys (NASDAQ:CDNS)

The analyst noted Nvidia and five other semiconductor companies as his top picks for the year. The iShares Semiconductor ETF SOXX had a rocky year. While semiconductors at large posted historic gains through 2024's first half, they erased much of their gains in the late summer and fall. One industry analyst is optimistic about the industry's prospects in 2025. The Semiconductor Analyst: Bank of America analyst Vivek Arya named six of his top semiconductor picks for 2025: NVIDIA Corp NVDA with a price target of $190. Broadcom Inc AVGO with a price target of $250. Marvell Technology Inc MRVL with a price target of $140. Lam Research Corp LRCX with a price target of $92. ON Semiconductor Corp ON with a price target of $90. Cadence Design Systems Inc CDNS with a price target of $365. The analyst also downgraded Microchip Technology Inc MCHP. The AI Boom: Arya cited Nvidia, Broadcom and Marvell as the leaders in AI. He says Lam Research's capital expenditures will recover in 2025 along with the reduction of China headwinds. The analyst also thinks ON Semiconductor will recover from cyclical trends while Cadence Design will benefit from its resiliency. The analyst sees the semiconductor industry's upcycle lasting into 2025. He noted that past bullish cycles have lasted, on average, roughly 10 quarters, while current bullishness has only lasted five quarters. Arya sees two major trends affecting the industry in 2025. "In the first half, we expect the AI investments driven by AI training and scaling of models to continue, doubling down on the Nvidia Blackwell deployment ramps driven by cloud customers," the analyst said. "At the same time, we expect trends for non-AI end markets to remain weak throughout 1H." Arya expects the CHIPS Act, enacted under President Joe Biden, to remain in place following the inauguration of President-elect Donald Trump. He expects all remaining funding to be dispensed in 2025. The analyst sees the automotive and industrial industries as fueling semiconductor demand in the year's second half. "In the second half, we expect a pickup in auto/industrial semis as customer/channel inventories normalize (replenishment + easy comps), as well as a pickup in global auto production," Arya said. The analyst projected electric vehicle sales to reaccelerate 29% year-over-year. Also Read: Elon Musk's Tesla Nearly 5 Times More Expensive Than Industry Average: Stock Surges Over 60% Since Election Photo: Shutterstock Market News and Data brought to you by Benzinga APIs

5 big analyst AI moves: Nvidia still top pick into 2025; MU, ORCL downgraded By Investing.com

Investing.com -- Here are the biggest analyst moves in the area of artificial intelligence (AI) for this week. InvestingPro subscribers always get first dibs on market-moving AI analyst comments. Upgrade today! Morgan Stanley (NYSE:MS) reaffirmed Nvidia (NASDAQ:NVDA) as a top stock pick for 2025, maintaining its Overweight rating and a price target of $166. Despite some near-term headwinds, including a slowdown in Hopper builds and staggered Blackwell product readiness, Morgan Stanley views these challenges as temporary. By the second half of 2025, the strength of Blackwell will be "the only topic," the firm's analysts stressed. Addressing competitive pressures from ASIC solutions, particularly from Marvell (NASDAQ:MRVL) and Broadcom (NASDAQ:AVGO), Morgan Stanley believes purchasing trends will favor GPUs over time. "While our forecasts for both AVGO/MRVL ASIC revenue are largely conservative, as are our forecasts for GPU, we believe that GPU will meaningfully outperform ASIC this year," analysts noted. The report also highlights Nvidia's $12 billion annual R&D investments as critical for maintaining its leadership in AI hardware and system-level innovations. Analysts also addressed the concerns over industry challenges, including scaling Artificial General Intelligence (AGI) clusters. While technologists advocate for larger AGI systems, financial backers remain cautious about return on investment (ROI). Nvidia's innovations, such as Mellanox (NASDAQ:MLNX) and NV-Link, are positioned to improve efficiency in this area. Nvidia's growth drivers -- including inference, sovereign AI training, and enterprise applications -- account for 70% of its data center revenue. Analysts believe these segments will continue driving growth even amid potential industry consolidation by 2026. "Even with some consolidation in the arms race, we should still see enduring growth potential," they commented. The upcoming Consumer Electronics Show (CES) in January 2025 is expected to boost sentiment for Nvidia. Analysts anticipate the messaging will emphasize strong Blackwell demand, albeit with supply constraints. "But by mid year we remain comfortable that the focus will remain on Blackwell which will be the driving force behind revenue in 2h, potentially unlocking more significant upside," the note concluded. Tesla (NASDAQ:TSLA) has experienced an extraordinary rally since the U.S. election, solidifying its status as the market's "narrative king," according to analysts at Barclays (LON:BARC). The electric vehicle (EV) maker's shares have surged approximately 90%, adding about $730 billion to its market capitalization - a feat matched only by a few tech giants like Nvidia and Apple (NASDAQ:AAPL). Barclays notes that this performance is particularly remarkable given the stock's apparent disconnect from underlying fundamentals. Tesla's price-to-earnings (P/E) ratio has soared from 80x before the election to an elevated 145x based on 2025 consensus EPS estimates. "The decoupling from fundamentals in many ways mirrors the rally we saw from Tesla in 2020-21," analysts led by Dan Levy said in a note. They attribute this rally to the "magnification of Tesla's narrative command," which centers around themes like autonomous vehicles (AV) and AI. Another factor contributing to the surge is the "Tesla-financial complex," where options activity amplifies stock movements. Moreover, retail investor interest remains robust, with 30% of Tesla's outstanding shares held by individual investors, according to Barclays. "Tesla remains the 'OG meme stock,'" the analysts emphasized. Barclays also pointed out the growth of the "Elon premium" in Tesla's valuation. The increased prominence of CEO Elon Musk has elevated interest in the company, translating to heightened enthusiasm for Tesla's stock. Bank of America (NYSE:BAC) (BofA) downgraded Micron Technology (NASDAQ:MU) to Neutral from Buy, citing a weaker-than-anticipated gross margin (GM) outlook for the second and third fiscal quarters. Shares of the chipmaker fell sharply Thursday after delivering disappointing Q2 guidance. Micron projects second-quarter revenue of approximately $7.9 billion, missing both BofA's $8.3 billion estimate and the consensus forecast of $9 billion. The company also expects a Q2 GM of 38.5%, below BofA's 40% estimate and the consensus of 41%. "Data center and HBM trends remain strong but weakness in PC and phone markets are putting downward pressure on memory pricing, especially in NAND," BofA analysts led by Vivek Arya noted. Persistent pricing challenges in NAND are expected to extend into the third quarter. Although BofA remains optimistic about Micron's position in high-bandwidth memory (HBM) and AI markets, it lowered its fiscal 2025 and 2026 pro forma earnings per share estimates by 5% and 11%, respectively, to $6.80 and $8.78. The stock's price target was also cut to $110 from $125. "Historically the stock has struggled to outperform when GM expansion has remained muted, leading to our stock downgrade to Neutral from Buy, even though we still feel positive about MU's position in the HBM/AI market where TAM was taken up +20% for CY25 to $30bn." While data center and HBM trends are highlighted as strong, the weakness in PC and phone markets continues to weigh on memory pricing, particularly NAND. BofA does, however, see potential for recovery in these markets in the latter half of 2025. Monness, Crespi, and Hardt downgraded Oracle (NYSE:ORCL) stock to Sell from Neutral, setting a 12-month price target of $130, implying over 22% upside from the current levels. The firm raised concerns about Oracle's valuation, rising competition, and aggressive capital expenditure (capex) plans. Oracle shares have climbed 60% year-to-date, largely driven by generative AI enthusiasm, marking their best performance since 1999. However, Monness analysts warned that "valuation is stretched, competition fierce, software in transition, and the macro environment fragile." Oracle's recent Q2 earnings highlighted growth challenges, the firm noted. Its FY25 EPS estimate of $6.17 remains unchanged, while its FY25 Cloud Services revenue projection has been revised to $24.9 billion, down from last year's $25.4 billion forecast. Monness expressed particular concern over Oracle's "bold capex plans," with spending expected to double in FY25. "Our current FY:25 capex projection of $14.2 billion represents 24.6% of revenue, up from 13% in FY:24, and well above the 27-year average of 4%," the analysts wrote. They argue this level of expenditure is unsustainable, dragging Oracle's free cash flow (FCF) margin to an estimated 8% for FY25, far below its historical average of 28%. The firm also pointed to Oracle's heavily leveraged balance sheet, with $88.6 billion in debt and a debt-to-capital ratio of 86%. This restricts the company's ability to boost shareholder returns through dividends or buybacks and limits its capacity for acquisitions or broader organic growth investments. While Oracle has seen early success in generative AI, Monness cautioned that "an inevitable shakeout in the LLM industry" and intensifying competition from major cloud providers could pose significant risks. Bank of America outlined its 2025 semiconductor outlook on Monday, spotlighting six chip stocks it recommends for investors in the coming year. The bank forecasts a 15% increase in semiconductor industry sales to $725 billion in 2025. This growth, although robust, is projected to be slower compared to the 20% growth seen in the current year. BofA anticipates memory sales to rise by 20% in 2025, following a 79% year-over-year increase in 2024, with core semiconductors, excluding memory, expected to grow by 13%. "We see 2025 as a year of two different trends. In the first half, AI investments and NVDA Blackwell deployments driven by US cloud customers sustain momentum in AI semis," analysts led by Vivek Arya said in a note. "However, in the 2H (second half), interest could shift to less-crowded auto/industrial chipmakers on inventory replenishment and pick-up in auto production assuming a global economic recovery." BofA's top picks include leaders in AI such as Nvidia, Broadcom, and Marvell Technology. "In AI we continue to trust.. at least till 2H25," analysts said. Furthermore, the firm identified Lam Research (NASDAQ:LRCX) as a flash-memory tool leader poised for capital expenditure recovery and impact resolution in China. Auto and EV leader ON Semiconductor (NASDAQ:ON) is highlighted for its potential cyclical recovery in the second half of 2025, and Cadence Design (NASDAQ:CDNS) Systems noted for its resilient double-digit growth, especially as the AI hardware cycle decelerates in the latter half of the year.