Bank of America: Chip sales will exceed one trillion dollars in 2026. These six stocks will become top investment choices.

Bank of America Corp analyst Vivek Aya believes that the artificial intelligence boom is not cooling down, but rather expanding. Despite some skeptics pointing out the eye-popping valuations of AI as a reason to avoid, Aya says that the industry is at a "midpoint" of a transformation that will last for a decade, led by NVIDIA Corporation (NVDA.US) and Broadcom Inc. (AVGO.US). In a report, Aya predicts that global semiconductor sales will achieve a 30% year-over-year growth, ultimately pushing the industry to break the $1 trillion annual sales milestone by 2026. Aya says he believes in companies that have a "moat quantified by profit margin structure." In addition to NVIDIA Corporation and Broadcom Inc., he also highlights four other large semiconductor companies - Lam Research, KLA Corporation (KLAC.US), Analog Devices, Inc. (ADI.US), and Cadence Design Systems (CDNS.US) - as his top picks for 2026. "I often say investing in semiconductors is very simple," Aya told reporters on a conference call on December 19. "You don't need any sell-side analyst to do this. Just sort all your companies by gross margins, buy the top five, and you won't go too wrong." Bank of America Corp estimates that by 2030, the total addressable market for AI datacenter systems will exceed $1.2 trillion, with a compound annual growth rate of 38%. AI accelerators alone represent a $900 billion market opportunity. Although the numbers are staggering, the market remains cautious due to the high cost of building AI data centers. According to Bank of America Corp's data, a typical 1-gigawatt facility requires over $60 billion in capital expenditure, with about half allocated directly to hardware. This raises the question: can the investment returns be realized in the end? Aya remains optimistic, stating that current spending is both "offensive and defensive." In other words, large tech companies have no choice but to invest to protect their existing business empires. Aya states that as the world's most valuable company, NVIDIA Corporation is currently operating in a "different galaxy." NVIDIA Corporation's stock price has risen by over 40% this year, and Aya warns against comparing this AI leader with traditional chip manufacturers. The price of a regular chip is around $2.40, while a NVIDIA Corporation graphics processing unit (GPU) sells for around $30,000. Although some are concerned that NVIDIA Corporation's market value has hit a ceiling, Bank of America Corp points out its free cash flow (expected to reach $500 billion in the next three years) and its valuation that is "still very cheap" after adjusting for growth factors. NVIDIA Corporation's price-to-earnings growth rate (PEG) is around 0.6 times, compared to the S&P 500 index with a PEG ratio close to 2 times, making it seem expensive. "Valuation is subjective," Aya said. If NVIDIA Corporation is the brain of AI, then Broadcom Inc. is the nervous system. Broadcom Inc.'s stock price has risen by over 50% this year, and it has transformed from a component supplier to a pillar of AI infrastructure with a market value of $1.6 trillion. This transformation is benefiting from its custom application-specific integrated circuits (ASICs) provided to mega-companies like Alphabet Inc. Class C (GOOGL.US) and Meta (META.US). As these giants strive to reduce their dependence on NVIDIA Corporation, they are turning to Broadcom Inc. Other Wall Street institutions share a similar view. Goldman Sachs Group, Inc. analyst James Schneider referred to Broadcom Inc. as a key arms dealer in the AI boom in a research report. Schneider gave a target price of $450, emphasizing the company's dominant capability in the field of custom chips and pointing out further "upside" from expanding collaborations with AI companies like Anthropic and OpenAI. Despite his optimistic outlook, Aya admits that the road to $1 trillion will be "rocky," and no stock is "risk-free." However, the reason he chooses these six companies as his top picks for 2026 is because they hold a dominant market share, typically around 70% to 75%. "Look at any leader in any part of the tech space, and you usually find that they have that kind of market share," Aya concludes. "This is actually normal."