BofA Eyes $1 Trillion Semiconductor Market Fueled by AI Spending
Bank of America names Broadcom, AMD, Lam Research, and KLA as top picks to capitalize on the surging demand for data center and memory chips.
Bank of America has issued a strong bullish forecast for the semiconductor industry, projecting that global sales could approach $1 trillion by 2027, driven by an insatiable appetite for artificial intelligence infrastructure. The investment bank highlighted several companies it believes are best positioned to capitalize on what it calls a durable structural trend in data center and memory spending.
In a note to clients, the firm identified chipmaker Broadcom (AVGO), CPU and GPU designer Advanced Micro Devices (AMD), and semiconductor equipment manufacturers Lam Research (LRCX) and KLA Corporation (KLAC) as its top picks. The bullish outlook is anchored in the massive capital expenditures from cloud service providers and enterprises building out their AI capabilities, a trend that is fueling a robust recovery in the memory market and demanding increasingly complex processing hardware.
"The current AI infrastructure build-out is proving to be a more durable, structural trend compared to previous cycles," the BofA report noted. This sentiment is supported by broader market data showing that capital spending from major tech firms on data centers is expected to approach $200 billion in 2025, according to Bloomberg Intelligence analysis.
Broadcom, with a market capitalization exceeding $1.6 trillion, is seen as a key beneficiary due to its leadership in custom silicon (ASICs) and networking hardware, which are critical components for AI data centers. Advanced Micro Devices, which has seen its stock price surge over the past year, is gaining traction with its MI300 series of accelerators, presenting a formidable challenge to Nvidia's dominance in the AI chip market.
The enthusiasm extends to the companies that supply the complex machinery needed to produce next-generation chips. Bank of America projects that spending on semiconductor equipment will continue its upward trajectory, hitting an estimated $118 billion in 2025 and potentially $138 billion by 2027. This directly benefits Lam Research, a specialist in wafer processing equipment, and KLA Corp., a leader in process control and yield management systems. As chip designs become more intricate, the capital intensity of the industry is expected to remain elevated, securing a steady stream of revenue for these equipment makers.
The forecast also signals a significant turnaround for the memory chip market, which is rebounding sharply from a cyclical downturn. According to industry analysts at TechInsights, the demand for high-bandwidth memory (HBM) and other advanced memory solutions for AI servers is tightening supply and driving prices higher.
Investors have already taken note of the sector's potential. Shares of AMD were trading up more than 7% in recent activity, pushing its market value past $410 billion. Broadcom, Lam Research, and KLA Corp also saw gains, reflecting a broad-based confidence in the sector's momentum ahead of upcoming earnings reports, which will be closely watched for confirmation of the AI-driven demand BofA has outlined.