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Bank of America has unveiled its 2025 semiconductor outlook, forecasting a $725 billion industry fueled by AI and EV growth. Highlighting six top chip stocks, including NVIDIA and ON Semiconductor, the bank anticipates trends shifting between AI investments and automotive chip demand.
Bank of America’s Semiconductor Forecast for 2025
Monday, Bank of America detailed its semiconductor prognosis for 2025, highlighting six chip firms that investors should consider for the upcoming year.
The bank predicts that by 2025, sales in the semiconductor industry will have increased by 15%, reaching $725 billion. Despite its robustness, this growth is expected to be less than the 20% rise observed this year.
Following a 79% year-over-year growth in 2024, BofA expects memory sales to climb by 20% in 2025. Core semiconductors, excluding memory, are projected to grow by 13%.
AI-Driven Growth Leads the First Half of 2025
“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 wrote 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.”
AI industry heavyweights, including NVIDIA, Broadcom, and Marvell Technology Inc., are among BofA's preferred investments, Investing.com shares.
Lam Research and Cadence Shine in Strategic Forecasts
The company also saw Lam Research, a frontrunner in flash memory tools, as a potential partner for impact resolution and capital expenditure recovery in China.
Cadence Design Systems Inc. is praised for its tenacious double-digit growth, particularly when the AI hardware cycle slows down in the second half of 2025, while ON Semiconductor, the leader in the auto and EV industries, is praised for its possible cyclical rebound in the same period.
Small to Mid-Cap Stocks Gain Recognition
Alterations to the ratings of smaller mid-cap equities are also included in the report. The predicted acceleration of growth has led to an upgrade to Buy for Advanced Energy Industries and a boost to Neutral from Underperform for Ambarella.
Meanwhile, analysts have downgraded Microchip Technology from Neutral to Underperform, citing a "lack of catalysts."
Expanding Beyond Computing to Networking and Optics
In addition, BofA sees opportunity in small to mid-cap firms including Ceragon Networks, MACOM Technology Solutions, and Coherent, particularly as development expands outside the computing industry to the networking and optics industries.
“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),” continued the analysts.
“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.”
