BofA flags eight chip stocks as enhanced buying opportunities

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Bank of America told clients that the risk/reward in semiconductors is positive despite near-term pressure, flagging eight names as enhanced buying opportunities. Analyst Vivek Arya pointed to Nvidia, Marvell, Micron, Lam Research, AMD, Intel, Analog Devices and ON Semiconductor. He said demand remains solid, but three headwinds could cap the group near term: macro factors including rising rates, data-center backlash and geopolitics; circular financing at the micro level; and heavy positioning, with chips 13% overweight versus the S&P 500 per BofA's holdings report. BofA sees roughly 10% further downside risk to the SOX index, which would return it to its pre-ChatGPT valuation discount to the broader market, though BofA called that unjustified on fundamentals. Arya cited bullish fourth- and first-quarter seasonality and a 20 times forward multiple against a 70% earnings CAGR through 2028. On Nvidia, Arya stated that another beat-and-raise is expected but may not be enough, with the core worry being that its open-ended funding of customers and suppliers is diluting earnings quality. The bank sees an opportunity for Nvidia to follow Apple's post-2012 playbook by lifting cash returns from around 50% of free cash flow to 75% or more. BofA named Lam Research and Micron its favorite long-term picks-and-shovels investments.

Impact on stocks 11

Semiconductors▲ · 8 stocks
Artificial Intelligence▲ · 2 stocks
Financials▲ · 1 stocks

Theme Impact 4

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