These 6 stocks will lead the $1 trillion chip surge in 2026, BofA says
Bank of America analyst Vivek Arya argues that the artificial intelligence boom is not cooling down, it is getting bigger.
While AI skeptics point to eye-popping valuations as a reason to vote, Arya said the industry is only at the “midpoint” of a decade-long transformation and is dominated by Nvidia (NVDA) and Broadcom (AVGO).
In its report titled “The Year Ahead 2026: Choppy, Still Cheerful,” Arya predicts a 30% year-over-year increase in global semiconductor sales, eventually pushing the industry past the historic $1 trillion annual sales milestone in 2026.
Arya highlighted the strong belief in companies with “moats measured by their margin structures.” In addition to Nvidia and Broadcom, he highlighted four other large-cap semiconductor companies—Lam Research (LRCX), KLA (KLAC), Analog Devices (ADI), and Cadence Design Systems (CDNS)—as his top picks for 2026.
“I often say that investing in semi-finished products is very simple,” Arya told reporters on December 19. “You don’t need any sales analysts to do this. Just take all your companies, rank them by gross margins, and buy the top five and you won’t be that wrong.”
BofA predicts that the total addressable market for AI data center systems will grow to over $1.2 trillion by 2030; This represents a compound annual growth rate of 38%. AI accelerators alone represent a $900 billion opportunity.
Despite these staggering numbers, the market remains cautious as AI data centers are expensive. A typical 1-gigawatt facility requires more than $60 billion in capital expenditures, according to Bank of America, with about half of that going directly to hardware.
This raises the question: Will there be a return on investment?
Read more: How do you protect your portfolio from the AI bubble?
Arya remained optimistic and argued that current spending was both “offensive and defensive.” In other words, Big Tech has no choice but to invest to protect their current empires.
Arya said Nvidia, the world’s largest company by market value, is now operating in “a different galaxy.”
While Nvidia’s shares are up more than 40% year to date, Arya warned against comparing the AI leader to traditional chip makers. While the average chip costs $2.40, an Nvidia graphics processing unit (GPU) sells for around $30,000.
While some fear Nvidia’s market cap has hit a ceiling, BofA noted a valuation that is “still incredibly cheap” when adjusted for free cash flow and growth, which is estimated to reach half a trillion dollars over the next three years.
