AI spending will fuel wins for Micron, Nvidia, Intel, and other chip stocks: BofA analyst

We are down to three months left in the year, and on Wall Street, that means the start of year-ahead predictions for the economy, stocks, and sectors.

It’s not unusual for analysts’ big calls to drive the stocks they call out, especially if the calls are assigned to price targets and earnings estimate lifts.

Here’s one of the first worthwhile look-ahead calls to hit our inbox, from BofA semiconductor analyst Vivek Arya on momentum tech stocks of companies at the center of the AI boom.

Arya pointed out the strong potential for AI capital expenditures to come in ahead of many estimates and be a better-than-expected tailwind for a host of stocks.

The call

On the outlook for AI infrastructure, Arya said, “We raise our CY26-30 estimate AI data center systems addressable market to $2.2 trillion at a +40% annual pace from $1.8 trillion/+33% prior. The virtuous flywheel of agentic tool adoption by consumers and enterprises, competition between public and private AI labs, and limited chip supply will likely keep AI spending robust for the next several years. Any pacing or addition of safety guardrails to frontier models is likely to increase not reduce compute requirements and shift more demand to faster growing inference from training. Meanwhile, valuations for top chip stocks remain compelling relative to their projected EPS growth, with SOX trading at a 21x forward PE, 12% below its 24x median multiple since the onset of ChatGPT and well below 40%+ projected EPS growth potential.”

The stock winners

A host of stocks have bullish setups within Arya’s revised AI thesis.

“Historically, CQ4 (and CQ1) have been the two best seasonal quarters to own chip stocks, with 300-500 basis of median outperformance vs. SPX from 2010-25,” Arya wrote. “Our top picks with near-term catalysts include: 1) Nvidia (NVDA) (enhanced buybacks, multiple GTC tradeshow events), 2) Intel (INTC) (agentic CPU strength, foundry win anticipation), 3) Micron (MU) (start of buybacks from Dec-9), 4) Marvell (MRVL) (Analyst Day on Oct 6, XPU ramp) and 5) Lam Research (LRCX) (share gain potential across memory, logic). We also continue to like AMD (AMD), Applied Materials (AMAT), Analog Devices (ADI) and On Semiconductor (ON). Staying watchful on Broadcom (AVGO) where we are Buy-rated on compelling valuation with potential for enhanced buybacks when the company reports FQ4 in December.”

Brian Sozzi is Yahoo Finance’s Executive Editor, host of the Sozzi Unleashed morning show and the Power Players with Brian Sozzi podcast, and a member of Yahoo Finance’s editorial leadership team. Follow Sozzi on X @BrianSozzi, Instagram, and LinkedIn. Tips on stories? Email brian.sozzi@yahoofinance.com.

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