Bank of America has identified eight semiconductor stocks as enhanced buying opportunities amid near-term headwinds, according to a client note published Tuesday. Analyst Vivek Arya maintained a positive risk/reward outlook for the sector despite macro pressures, including rising interest rates, geopolitical tensions, and data-center backlash.
The eight stocks flagged by BofA are Nvidia, Marvell, Micron, Lam Research, AMD, Intel, Analog Devices, and ON Semiconductor. Arya noted that while semiconductor demand remains solid, the group faces three key headwinds: macroeconomic factors, circular financing at the micro level, and elevated positioning. BofA’s holdings data indicate chip stocks are currently 13% overweight relative to the S&P 500.
BofA estimates the SOX semiconductor index could decline roughly 10% further, potentially reversing to its pre-ChatGPT valuation discount to the broader market—a valuation gap the bank views as unjustified on fundamentals. The analyst cited compelling seasonality for the fourth and first quarters, alongside a 20 times forward earnings multiple against a projected 70% compound annual growth rate in earnings through 2028.
Among the individual names, Nvidia remains a focal point. Arya expects another earnings beat and guidance raise but cautioned that concerns persist over open-ended funding for customers and suppliers, which could dilute earnings quality. BofA suggested Nvidia could follow Apple’s post-2012 strategy by increasing cash returns from roughly 50% of free cash flow to 75% or more. Lam Research and Micron were highlighted as BofA’s top long-term "picks-and-shovels" investments within the sector.
