Bank of America predicts that the semiconductor industry will continue to thrive until mid-2026, driven by the momentum of artificial intelligence. Despite the possibility of near-term triggers like the US election or monetary policy affecting the market, analysts remain bullish on the sector. The semiconductor industry typically experiences 10 quarters of growth after a downcycle, and the current upcycle began in late 2023, suggesting strength until mid-2026.
Investors looking to capitalize on this trend can consider three key themes: cloud computing, cars, and complexity. Nvidia and Broadcom are top picks for cloud computing, with strong potential for growth. NXP Semiconductors is highlighted as a stock to watch in the auto industry, with expectations of solid double sales growth. Additionally, companies like KLA Corporation and Synopsis benefit from the growing complexity of semiconductor manufacturing.
The semiconductor sector is expected to see double-digit annual sales growth in 2025, following an inventory correction in the previous year. The increasing importance of chips in various industries, along with the trend towards global reshoring efforts, is driving the industry’s valuations higher. Bank of America maintains positive price objectives for key semiconductor stocks, reflecting confidence in their growth potential.
Overall, the outlook for the semiconductor industry remains positive, with significant growth expected in the coming years. Investors can consider aligning their portfolios with the three key themes identified by Bank of America to benefit from the industry’s continued expansion.