Why the rally in chip stocks could broaden beyond AI in 2025, according to BofA
Slaven Vlasic/Getty Images for The New York Times; Chelsea Jia Feng/BI
- AI will continue to drive the chip stocks higher in early 2025 before investor interest shifts, BofA says.
- Analysts see upside for auto and industrial chipmakers as global growth spurs inventory and auto production.
- "We see 2025 as a year of two different trends," the analysts said in a Monday note.
Chip stocks will continue to get a boost from artificial intelligence enthusiasm next year but other trends will emerge to help drive semiconductor shares higher later in the year, Bank of America said.
The bank's analysts, led by Vivek Arya, say AI chip stocks will continue to surge before the rally broadens toward less-crowded auto and industrial chipmaker stocks in the second half of 2025.
"We see 2025 as a year of two different trends," the analysts said in a note on Monday.
In the first half of the year, they see AI semiconductor stocks sustaining strong momentum as excitement continues to build and Nvidia rolls out its new Blackwell GPU.
The chip giant's next-gen Blackwell chip has been highly anticipated given its increase in power over the company's current Hopper chip, as companies look for increasingly powerful tools to train and run AI models.
The analysts say the strong demand for the chips from US cloud customers like Google and Meta should help the rally sustain momentum, though delivery uncertainties for the chips are a lingering risk after initial shipment delays.
"We expect the AI investments driven by AI training and scaling of models to continue, doubling down on the NVDA Blackwell deployment ramps driven by cloud customers," they said.
In the second half of the year, though, the analysts see investor interest shifting as AI stocks potentially peak amid concerns about returns on heavy investments by companies in the space.
"In AI we continue to trust.. at least till 2H25," the analysts said. "AI stocks could potentially peak in 2H25E when investors start to get concerned about tougher YoY compares in 2026E following two years of 100%+ annual growth in AI silicon."
They say sentiment could shift toward auto and industrial chipmaker stocks as a global economic recovery replenishes inventory and boosts auto production.
"In the second half, we expect a pickup in auto/industrial semis as customer/channel inventories normalize (replenishment + easy comps), as well as a pick-up in global auto production," the analysts said.
The shift would mark a broadening in the semiconductor rally, which has seen the sector over 30% so far this year as AI chipmakers like Nvidia and Taiwan Semiconductor surge.
The analysts see semiconductors maintaining their strong momentum to boost sales by 15% to $725 billion in 2025, marking a slight slowdown from a 20% rise expected for the full year in 2024.