TLDR
- Nvidia, Broadcom, AMD, and Credo flagged by Bank of America as undervalued semiconductor investments
- Projected revenue growth of 42% and earnings growth of 49% from 2025 through 2027
- Stocks trade at 24 times 2027 earnings, equal to 0.5x PEG ratio versus historical norms
- BofA tracker shows cloud capital expenditure could reach 38% growth in 2026, potentially hitting 50%
- March GTC conference and upcoming earnings reports expected to drive interest in chip sector
Bank of America released analysis Monday highlighting investment opportunities in the semiconductor sector. Analyst Vivek Arya named Nvidia, Broadcom, AMD, and Credo Technology Group as compute stocks with attractive pricing.
The bank’s assessment comes as artificial intelligence spending continues to accelerate across the technology industry. Major cloud providers are expanding their computing infrastructure to support AI workloads.
Arya described the chip sector as offering mixed opportunities. Some semiconductor stocks appear overvalued while compute-focused companies present better value propositions.
The four recommended stocks are expected to deliver strong financial results through 2027. Average revenue growth is projected at 42% from 2025 to 2027.
Earnings per share growth is forecast even higher at 49% over the same timeframe. Current market prices put these stocks at 24 times their projected 2027 earnings.
This valuation equals a 0.5x price-to-earnings growth ratio. Bank of America views this pricing as attractive compared to historical semiconductor valuations.
The low multiples exist despite continued expansion in AI-related technology spending. Cloud service providers show no signs of slowing their infrastructure investments.
Cloud Infrastructure Investment Trends
Major cloud companies view computing infrastructure as essential to their business operations. Bank of America expects this spending priority to support double-digit sales growth for chip suppliers.
The bank maintains proprietary tracking data on cloud capital expenditure patterns. Current indicators suggest cloud spending could increase 38% year over year in 2026.
Growth rates may accelerate as the year progresses according to BofA projections. The firm sees potential for spending increases to reach 50% by the fourth quarter of 2026.
Higher investment levels are not expected to create financial pressure on cloud providers. Bank of America projects positive aggregate free cash flow across the sector despite increased spending.
This financial flexibility allows cloud companies to maintain their infrastructure expansion plans. Semiconductor suppliers providing computing components benefit from this sustained demand.
Market Catalysts on the Horizon
Bank of America anticipates increased investor focus on compute stocks during the first quarter. Upcoming earnings reports from major cloud providers could provide positive momentum for chip stocks.
Nvidia’s GTC conference scheduled for mid-March represents another potential catalyst. Arya expects anticipation surrounding this event to generate renewed interest in the compute sector.
The annual conference typically features new product launches and technology roadmap updates. Market participants closely monitor the event for signals about AI computing direction.
Bank of America maintains that compute chip stocks offer better value than other semiconductor segments. Current valuations appear disconnected from the growth trajectories projected through 2027.
The four stocks identified trade well below their historical valuation ranges. This pricing gap exists despite strong fundamentals and positive industry spending trends supporting their business outlook.
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