The semiconductor sector has sold off sharply in 2026, but Bank of America says the dip looks more like an opportunity than a warning sign.
The Philadelphia Semiconductor Index has underperformed the S&P 500 by roughly 18% from its peak. Analysts led by Didier Scemama say this tracks closely with past trade-tension-driven corrections, not the deeper 30% drawdowns seen during full cyclical downturns in 2011, 2022, and 2024-2025.
Bank of America frames the selloff as driven by trade tensions, not weak fundamentals. That distinction, the bank argues, is being missed by the broader market.
The sector currently trades at around a 3x discount to average 2028 consensus multiples. Semiconductor capital equipment stocks are sitting at an even steeper 6-7x discount, which BofA sees as the most attractive entry point in years.
ASML is BofA’s preferred large-cap name in Europe. The bank keeps a Buy rating, pointing to higher average selling prices and stronger gross margins as structural supports. BofA’s 2027 and 2028 earnings estimates for ASML sit 6-7% above Street consensus.
ASM International is expected to beat second-quarter earnings by around 11% when it reports Tuesday after European markets close. BofA points to capital expenditure increases from TSMC and Intel, strength in China end markets, and a recovery in analog and power semiconductor demand.
STMicroelectronics is the third Buy-rated name in the semicap group. BofA sees earnings power of $4.50 or more in 2028, backed by a book-to-bill ratio at 2x and manufacturing efficiencies expected to add four percentage points of gross margin by mid-2028.
BofA forecasts wafer fabrication equipment spending will reach at least $250 billion in 2028, implying two straight years of roughly 30% year-over-year growth.
A key anchor for that forecast is a reported five-year, $200 billion foundry deal between Samsung and Broadcom. Capital expenditure increases from TSMC and Intel in recent weeks add further weight to the projection.
TSMC reported second-quarter 2026 revenue of $40.2 billion, beating both its own guidance and analyst forecasts. Its gross margin came in at 67.7%, above expectations. The company raised its full-year 2026 revenue growth outlook to slightly above 40%, driven by strong AI chip demand.
BofA also pushed back on fears of a memory pricing collapse, saying long-term agreements signed by hyperscalers, automotive companies, and consumer OEMs make a crash unlikely.
Outside the equipment names, Bank of America flagged Nokia as a Buy based on an order intake of €2.8 billion that it says the market is undervaluing. Ericsson and Logitech were both rated Underperform, with the bank citing margin and growth concerns for each.
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