Bank of America identified four semiconductor companies as compelling investment opportunities in the compute space. The bank’s analyst Vivek Arya pointed to Nvidia, Broadcom, AMD, and Credo Technology Group as stocks with attractive valuations.
The analysis came in a note released Monday. Arya described the broader chip sector as mixed, with some stocks overextended while compute names offer better value.
The four companies are forecast to deliver strong growth over the next two years. Sales are projected to increase an average of 42% from 2025 to 2027.
Adjusted earnings per share are expected to grow even faster at 49% over the same period. Despite these projections, the stocks trade at just 24 times 2027 earnings.
This pricing represents a 0.5x price-to-earnings growth ratio. Arya considers this valuation compelling relative to other semiconductor stocks.
The low valuations persist even as artificial intelligence investment continues to expand. Major technology companies are increasing spending on AI infrastructure and computing power.
Large cloud service providers continue to prioritize computing infrastructure investments. Bank of America expects this spending to drive double-digit revenue growth for chip companies.
The bank tracks cloud capital expenditure trends across major providers. Current data suggests cloud spending could rise 38% year over year in 2026.
BofA believes this growth rate may accelerate throughout the year. The firm sees potential for spending increases to approach 50% by December 2026.
Rising investment levels are not expected to strain cloud provider finances. The bank projects aggregate free cash flow will remain positive across the sector.
This financial stability allows cloud companies to maintain their infrastructure spending pace. The continued investment benefits semiconductor suppliers providing computing hardware.
Bank of America expects renewed attention on compute stocks in coming months. Cloud company earnings reports scheduled for the first quarter could provide positive momentum.
Nvidia’s annual GTC conference takes place March 16-19. Arya believes anticipation around this event will help energize the compute chip sector.
The conference typically features product announcements and technology demonstrations. Industry participants watch the event closely for insights into AI computing trends.
BofA maintains that compute-focused chip stocks offer superior value compared to other semiconductor categories. Current market prices do not fully reflect the projected growth rates through 2027.
The bank characterizes the semiconductor landscape as divided between stretched valuations in some areas and compelling opportunities in compute. The four recommended stocks fall into the latter category based on their growth prospects and current pricing.
The post BofA Analyst Identifies Nvidia, AMD, Broadcom, Credo as Attractive Investments appeared first on Blockonomi.
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