Bank of America 2025 Semiconductor Outlook

On Monday, Bank of America (BofA) presented its semiconductor outlook for 2025, highlighting six recommended chip stocks for investors.

Key Forecasts

• Industry Growth: BofA predicts a 15% increase in semiconductor sales, reaching $725 billion in 2025. This is slower than the 20% growth anticipated for the current year.
• Memory Sales: A projected 20% rise in memory sales is expected in 2025, following a remarkable 79% year-over-year increase in 2024.
• Core Semiconductors: Excluding memory, core semiconductor growth is forecasted at 13%.

Market Trends

Analysts, led by Vivek Arya, note:
– First Half of 2025: Continued momentum from AI investments and NVIDIA Blackwell deployments driven by US cloud customers.
– Second Half of 2025: Shift towards auto and industrial chipmakers, driven by inventory replenishment and increased auto production as global economic conditions improve.

Top Stock Picks

BofA's top semiconductor stocks include:
– NVIDIA (NASDAQ: NVDA)
– Broadcom (NASDAQ: AVGO)
– Marvell Technology Inc (NASDAQ: MRVL)
– Lam Research (NASDAQ: LRCX) for its flash-memory tools.
– ON Semiconductor (NASDAQ: ON) due to cyclical recovery potential.
– Cadence Design Systems Inc (NASDAQ: CDNS) for resilient double-digit growth.

Rating Changes

• Upgraded: Advanced Energy Industries (NASDAQ: AEIS) to Buy from Neutral.
• Upgraded: Ambarella (NASDAQ: AMBA) to Neutral from Underperform.
• Downgraded: Microchip Technology (NASDAQ: MCHP) to Underperform from Neutral.

Small to Mid-Cap Opportunities

BofA also sees potential in:
– Coherent (NYSE: COHR)
– MACOM Technology Solutions (NASDAQ: MTSI)
– Ceragon Networks (NASDAQ: CRNT)

These stocks may benefit from growth in networking and optics sectors.

AI Market Dynamics

Despite the saturation of AI stocks, BofA anticipates ongoing competition among cloud service providers and continuous innovation in AI technology.

However, it warns that AI stocks may peak in the second half of 2025, as growth pressures increase for 2026, following two years of over 100% annual growth in AI silicon.