Leading the chip stocks that have led the US stock market into a long bull market, they are expected to continue to "skyrocket" next year.

As 2025 approaches, the analyst team at Wall Street financial giant Bank of America Corp (Bank of America) has released the "preferred chip stock list" for the US stock market next year, including the "AI chip three giants" that have been extremely popular in the US stock market since 2023. According to the Bank of America analyst team, chip stocks are likely to continue to be one of the most eye-catching sectors in the US stock market next year, and the contribution to the increase in value is expected to expand from the "AI chip three giants" that have benefited from the AI boom to analog chips and electric vehicle chip stocks, which have long underperformed the US stock market index and the Philadelphia Semiconductor Index. The latest report from the Bank of America analysis team shows that one of the core DRIVES of this round of "long-term bull market" in the US stock market since 2023, chip stocks, regained global favor after being sold off at the beginning of the financial reporting season, and are expected to continue to attract funds in 2025, making it very likely to once again start a skyrocketing bull market trend, becoming the core focus of the US stock market. The "AI chip three giants" in the US chip sector - NVIDIA Corporation (NVDA.US), Broadcom Inc. (AVGO.US), and Marvell Technology, Inc. (MRVL.US) are all listed on Bank of America Corp's 2025 "preferred chip stock list". The chip stocks on this list also include semiconductor equipment giant Lam Research Corporation (LRCX.US), automotive chip leader ON Semiconductor Corporation (ON.US), and one of the EDA software leaders Cadence Design Systems (CDNS.US). Among the "AI chip three giants," Broadcom Inc. is undoubtedly the most dazzling chip company in the recent US stock market, and even in the global chip market. After announcing strong growth in performance and extremely optimistic outlook for the AI ASIC chip market last Friday morning Beijing time, its stock price surged by over 20% in a single day in the US stock market, exceeding the important milestone of a trillion-dollar market value. On Monday during the US stock trading hours, it continued to rise by over 10%, with a total market value close to 1.2 trillion US dollars. Among the "AI chip three giants", NVIDIA Corporation focuses on AI GPU, while the latter two focus on the AI ASIC chip market. Customized AI ASICs can provide hardware acceleration for specific tasks, especially in large-scale AI training and inference tasks. They outperform general-purpose NVIDIA Corporation GPUs in terms of efficiency and cost-effectiveness. These two types of AI chips will coexist in the long term, providing the best solutions for different AI computing scenarios. With strong demand for Broadcom Inc.'s Ethernet switch chips in major data centers around the world, and its absolute technical leadership in chip-to-chip communication and high-speed data transfer between chips, Broadcom Inc. has become the most important player in the field of custom AI chips in recent years. For example, in the development of Alphabet Inc. Class C's self-developed server AI chip - TPU AI acceleration chip, Broadcom Inc. is a core player. Broadcom Inc. and Alphabet Inc. Class C's team jointly participate in the development of the TPU AI acceleration chip and AI training/inference acceleration library. In addition to chip design, Broadcom Inc. also provides Alphabet Inc. Class C with key inter-chip communication intellectual property rights and is responsible for manufacturing, testing, and packaging new chips, thereby providing essential support for Alphabet Inc. Class C to expand into new AI data centers. With its leading position in the AI ASIC market, Broadcom Inc. may soon break NVIDIA Corporation's "AI chip monopoly". Analyst Jordan Klein from Mizuho pointed out that Wall Street is paying attention to the demand for ASICs from large cloud computing companies such as Alphabet Inc. Class C, which may be one of the reasons for the unexpected decline in NVIDIA Corporation's stock last Friday. "In my opinion, custom AI chips will continue to take market share from NVIDIA Corporation's AI GPU every year, even though NVIDIA Corporation's GPUs still dominate AI training purposes." The semiconductor boom cycle is far from over, and the soaring chip stocks still have plenty of room to grow. "After experiencing a big rise, chip stocks still have plenty of room to grow, and we believe there will be two different upward trend curves in 2025," wrote the team led by Bank of America Corp analyst Vivek Arya in this chip stock research report. "In the first half of the year, AI investments driven by US cloud super customers and the deployment scale of NVIDIA Corporation's Blackwell Architecture AI GPU will maintain the upward momentum of chip companies closely related to AI. In the second half of the year, if the global economy continues to recover, the market focus may shift to inventory replenishment and the recovery of automobile production, which means that automotive/industrial chip manufacturers that have long been underweight and significantly underperformed the US stock market may regain favor with investors." The Bank of America Corp team led by Arya also stated that overall, semiconductor market sales are expected to increase by about 15% in 2025, reaching $725 billion, on the basis of strong growth in 2024. "This is still a very strong growth pace, although it is slightly lower than this year's 20% forecast.""Compared to before, the growth rate has slightly decreased."The analysis team added that NVIDIA Corporation, Broadcom Inc., and Marvell Technology, Inc. are expected to continue benefiting from the market demand closely related to data center artificial intelligence chips, large-scale cloud computing customers, and the surging demand for AI computing resources from global data center operators. Semiconductor equipment giant, Applied Materials, Inc., is also expected to benefit from flash memory demand and the ongoing recovery of semiconductor equipment spending in the Chinese market. In addition, the Bank of America analysis team stated that the automotive chip giant, ON Semiconductor Corporation, which has long lagged behind the US stock market and the Philadelphia Semiconductor Index, is expected to greatly benefit from the recovery in demand for electric vehicles and the automotive industry as a whole (possibly in the second half of next year). KLA Corporation has long been a leader in chip design automation and is expected to benefit in the long term from leading chip designers such as NVIDIA Corporation, AMD, and Apple Inc., as well as tech giants like Amazon.com, Inc., and Microsoft Corporation stepping up their research and development of high-performance AI chips. The demand for electronic design automation (EDA) software that can design more complex architecture AI chips and accelerate chip design with new AI technologies is expected to continue to expand. EDA software tools are indispensable for all types of chip design by chip giants such as Apple Inc., NVIDIA Corporation, and AMD, while lithography machines are one of the core tools for transforming chip design blueprints into actual products. The Bank of America analysis team led by Alia pointed out in the report, "The semiconductor market's prosperity cycle often lasts about 2.5 years (followed by a 1-year downturn), and we are currently only in the mid-term stage of this semiconductor upswing cycle that began in [the fourth quarter of 2023]." "We expect sales in the storage chip market to grow by 20% in 2025 based on a strong foundation in 2024, an increase from 79% in 2024," the report noted, predicting that the core semiconductor market (excluding the storage sector) is expected to grow 13% primarily due to strong performance in data centers, while other subsectors like consumer electronics, electric vehicles, and the automotive sector, and industrial chip products may see a slight decline compared to 2024, but the decline is expected to be much smaller. This optimistic outlook for the semiconductor market in the Bank of America Corp.'s research report is in line with the latest World Semiconductor Trade Statistics (WSTS) forecast for the semiconductor market size, which is expected to continue strong growth in chip demand in 2025. Compared to the spring forecast, WSTS has significantly raised its forecast data for the 2024 and 2025 semiconductor market size in its latest autumn forecast, predicting a 19.0% year-on-year growth to $627 billion in the global semiconductor market in 2024. WSTS expects the semiconductor market size to continue growing in 2025, which means that the global semiconductor market is expected to grow by approximately 11.2% on top of the already strong recovery trend in 2024, with the global market size expected to reach around $697 billion. WSTS expects that the growth in the semiconductor market size in 2025 will be mainly driven by the storage chip category and the artificial intelligence logic chip category. Under the continued strong push of the unprecedented global AI trend, the total sales growth of the storage chip category dominated by DRAM and NAND is expected to exceed 13% in 2025, while the total sales growth of the logic chip category including CPUs and GPUs is expected to exceed 16%. It is also expected that the growth rates of discrete devices, optoelectronics, sensors, MCUs, and analog chips, among all other sub-categories of chips, will achieve single-digit growth rates. For chip stocks, some potential risks cannot be ignored Although the overall outlook for the semiconductor market remains optimistic, the Bank of America Corp. analysis team stated in the research report that there are still many unknown factors for 2025, with the biggest negative impact concentrated on the growth of market demand related to artificial intelligence, demand in the Chinese market, broader macroeconomic recovery conditions, and how the story of the American chip giant Intel Corporation will continue. The Bank of America analysis team led by Alia added that as AI applications accelerate penetration into enterprise operations and daily lives of individual consumers, the "rotation trend" from semiconductor stocks to software stocks benefiting from AI will continue in 2025. This trend may intermittently put pressure on the upward trend of popular chip stocks and drive profit-taking in chip stocks, shifting towards software stocks. "From a positive perspective, we can see that under the leadership of the new US government led by President Trump, the support policies for US economic growth will promote the resumption of mergers and acquisitions (especially in the semiconductor and software markets)," the Bank of America analysis team wrote. Nevertheless, the Bank of America analysis team led by Alia emphasized in the report that chip stocks benefiting from the booming global AI trend, especially the "AI chip three giants," are expected to continue strong gains, at least until the second half of 2025. In addition to these three popular chip stocks and the aforementioned "preferred chip stock list," the Bank of America analysis team stated that chip giants like ARM (ARM.US), Micron Technology (MU.US), Coherent (COHR.US), Credo Technology (CRDO.US), and Macom (MTSI) also have the potential to greatly benefit from this unprecedented AI trend.