Bank of America recently released a report expressing long-term optimism for the semiconductor industry, stating that the surge in artificial intelligence spending still has a long runway for development. The institution listed NVIDIA (NVDA), Broadcom (AVGO), and Lam Research (LRCX) among its top semiconductor stocks to hold for 2026, emphasizing that industry leaders will demonstrate resilience amid market volatility.
Analysts at Bank of America noted that the AI race is currently still in the “early to middle innings.” While increased scrutiny over AI investment returns and the cash flows of hyperscale cloud providers may heighten stock price volatility, this impact will be offset by continuously updated AI model developers and the demand from “AI factories” serving enterprise and sovereign clients. Analysts predict that driven by high data center utilization, supply tightness, accelerated enterprise adoption, and competition among large language model developers, cloud giants, and sovereign clients, AI semiconductor sales in 2026 could achieve year-over-year growth of 50% or higher once again. Industry leader NVIDIA is seen as a key beneficiary, with a series of catalysts ahead, including events like the Consumer Electronics Show and the GTC conference.
Beyond the aforementioned three companies, Bank of America has also constructed a broader list of core holdings aimed at comprehensively capturing demand across the AI industry chain. Among large-cap stocks, the institution favors KLA Corporation (KLAC), Analog Devices (ADI), and Cadence Design Systems (CDNS), viewing them as high-quality industry leaders capable of covering critical areas such as advanced manufacturing, analog chips, and chip design software. Among small and mid-cap stocks, companies like Credo Technology (CRDO) and MKS Instruments (MKSI) are also on the radar. The report specifically highlighted that Broadcom is favored for its positioning in custom AI chips, while semiconductor equipment spending is expected to continue growing, driven by demand for high-bandwidth memory, advanced logic process technologies, and advanced packaging upgrades.
Regarding the analog chip sector, Bank of America advises investors to “remain selective,” citing caution over a broad-based industry recovery and pointing to challenges such as a subdued macro environment, declining automotive production, and intensifying competition. Looking ahead to 2026, the report also highlights emerging themes like co-packaged optics, robotics, and quantum computing. Among these, Lumentum (LITE) and Coherent (COHR) are seen as leaders in the co-packaged optics field. Quantum computing is positioned as an emerging opportunity with long-term potential.
Bank of America predicts that 2026 will mark the “midpoint” of an 8 to 10-year journey of upgrading traditional IT infrastructure to accommodate accelerated computing and AI workloads. Against this backdrop, global semiconductor sales are expected to advance toward the first trillion-dollar milestone, achieving approximately 30% growth, while wafer fabrication equipment sales are also projected to see nearly double-digit year-over-year growth. This optimistic outlook paints a clear picture for investors of the semiconductor industry’s continued expansion within the long-term wave of AI.
