Investing.com -- Bank of America (NYSE:BAC) outlined its 2025 semiconductor outlook on Monday, spotlighting six chip stocks it recommends for investors in the coming year.
The bank forecasts a 15% increase in semiconductor industry sales to $725 billion in 2025. This growth, although robust, is projected to be slower compared to the 20% growth seen in the current year.
BofA anticipates memory sales to rise by 20% in 2025, following a 79% year-over-year increase in 2024, with core semiconductors, excluding memory, expected to grow by 13%.
“We see 2025 as a year of two different trends. In the first half, AI investments and NVDA Blackwell deployments driven by US cloud customers sustain momentum in AI semis,” analysts led by Vivek Arya said in a note.
“However, in the 2H (second half), interest could shift to less-crowded auto/industrial chipmakers on inventory replenishment and pick-up in auto production assuming a global economic recovery.”
BofA’s top picks include leaders in AI such as NVIDIA (NASDAQ:NVDA), Broadcom (NASDAQ:AVGO), and Marvell Technology Inc (NASDAQ:MRVL).
“In AI we continue to trust.. at least till 2H25,” analysts said.
Furthermore, the firm identified Lam Research (NASDAQ:LRCX) as a flash-memory tool leader poised for capital expenditure recovery and impact resolution in China.
Auto and electric vehicle (EV) leader ON Semiconductor (NASDAQ:ON) is highlighted for its potential cyclical recovery in the second half of 2025, and Cadence Design Systems Inc (NASDAQ:CDNS) is noted for its resilient double-digit growth, especially as the AI hardware cycle decelerates in the latter half of the year.
The report also includes rating changes for smaller mid-cap stocks. Advanced Energy Industries (NASDAQ:AEIS) has been upgraded to Buy from Neutral, and Ambarella (NASDAQ:AMBA) has been raised to Neutral from Underperform due to expected growth acceleration.
On the other hand, Microchip Technology (NASDAQ:MCHP) has been downgraded to Underperform from Neutral, with analysts citing a “lack of catalysts.”
Moreover, BofA recognizes the potential in small to mid-cap stocks such as Coherent (NYSE:COHR), MACOM Technology Solutions (NASDAQ:MTSI), and Ceragon Networks (NASDAQ:CRNT), especially as growth extends to networking and optics sectors beyond just computing.
“Despite the crowded nature of AI stocks, we still see a continued “arms-race” between cloud service providers, TAM expansion into enterprise on-premises and sovereign deployments, and continued pace of innovation in training and inference (agentic AI),” analysts continued.
“However, 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.”