In 2024, driven by the wave of artificial intelligence (AI), the strong performance of AI chip manufacturers such as Nvidia has led to a rise of over 30% in the semiconductor sector of the US stock market so far this year. Chip stocks are also one of the core driving forces behind the long-term bull market in the US stock market since 2023.
Looking ahead to 2025, the Bank of America analyst team led by Vivek Arya stated in a recent report that after being sold off at the beginning of the earnings season, US chip stocks have regained global funding favor and are expected to continue attracting capital inflows in 2025, potentially opening a new wave of strong upward momentum.
The semiconductor boom cycle is only halfway through
Alia said that overall, it is expected that the overall sales of the semiconductor market in 2025 will increase by about 15% on the basis of strong growth in 2024, reaching $725 billion. "Although this growth rate has slowed down compared to this year's forecast of 20%, it is still very strong and robust
The demand boom cycle in the semiconductor market often lasts for about 2.5 years (followed by a 1-year decline cycle), and we are currently only in the middle stage of the boom cycle, which begins in the fourth quarter of 2023. We expect the sales of the storage chip market to continue to grow by 20% year-on-year in 2025 (79% year-on-year in 2024) on the strong basis of 2024, and the core semiconductor market (excluding the storage sector) is expected to grow by 13%, mainly due to strong performance in data centers. "The report states," The growth rate of chips in other sub sectors, such as consumer electronics, electric vehicles, and industrial sectors, may slightly decline, but the decline will also be significantly narrower than in 2024
The optimistic outlook of Bank of America is similar to the latest semiconductor market size forecast report for autumn by the World Semiconductor Trade Statistics Organization (WSTS). WSTS also predicts that chip demand will continue to grow strongly in 2025. In the autumn report, WSTS significantly raised its forecast for the global semiconductor market size in the next two years compared to the spring report. It is expected that the global semiconductor market will grow by 19% year-on-year to $627 billion in 2024, and the semiconductor market size will increase by about 11.2% on the strong basis of 2024 in 2025, bringing the global market size to about $697 billion.
WSTS stated that the growth of the semiconductor market in 2025 will mainly be driven by the storage chip category and AI logic chip category. It is expected that under the unprecedented global trend of AI layout, the total sales growth rate of the storage chip category dominated by DRAM and NAND is expected to exceed 13% in 2025, and the total sales growth rate of AI logic chip categories such as CPU and GPU is expected to exceed 16%. The growth rate of all other segmented chip markets will also reach single digit growth.
AI chips lead the way in the first half of the year, shifting towards automotive and industrial chips in the second half
Based on this prediction, Bank of America stated that US chip stocks will continue to rise in 2025, and AI chip stocks will maintain strong momentum in the first half of 2025, while market attention will shift to untapped areas such as automotive and industrial semiconductors in the second half of the year.
After experiencing a sharp rise, the upward space for chip stocks is still very broad, and we believe that there will be two different upward trend curves in 2025, "wrote the Alia team in the report." In the first half of the year, US cloud computing super customers are expected to accelerate their investment in AI training and model expansion, and continue to expand the deployment scale of Nvidia Blackwell architecture AI GPU, which will maintain the upward trend of these AI chip companies' stock prices and peak in the first half of the year. In the second half of the year, investors will begin to worry that the AI chip business will face more severe year-on-year comparisons after experiencing an annual growth rate of over 100% in 2026. In this context, with the global economic recovery, inventory replenishment, and the recovery of automobile production, the automotive and industrial chips that have long been less crowded and significantly underperforming the US stock market are expected to regain investor favor
In terms of individual stocks, Bank of America has included the "AI chip giants" of the US chip sector - Nvidia, Broadcom, and Maiwell Technology - in its "preferred chip stock list" for 2025. The chip stocks on the list also include semiconductor equipment giant LRCX. US, automotive chip giant ON. US, and one of the leaders in the field of electronic design automation (EDA) software, Konten Electronics (CDNS. US).
The team analyzed that Nvidia, Broadcom, and Maiwell Technologies are expected to continue to benefit from market demand closely related to AI chips in data centers, as well as the continued expansion of demand for AI computing resources from ultra large scale cloud computing customers and major global data center operators. Meanwhile, Panlin is expected to benefit from the continued recovery of flash memory demand and semiconductor equipment spending in the Chinese market. In addition, the automotive chip giant, ON Semiconductor, which has long underperformed the US stock market and the Philadelphia Semiconductor Index, is expected to benefit significantly from the recovery of final demand for electric vehicles and the entire automotive industry, which may occur in the second half of next year. Kenteng Electronics is expected to benefit in the long term from technology giants such as Nvidia, AMD, and Apple, as well as cloud computing giants such as Amazon and Microsoft accelerating the development of high-performance AI chips. EDA software tools have become an indispensable tool for chip giants such as Apple, Nvidia, and AMD to design all types of chips, and their demand for EDA software is expected to continue to rise.
In addition to the "chip giants" and the stocks on the "preferred chip stock list" mentioned above, Bank of America also stated that chip giants such as ARM, Micron, Coherent (COHR. US), Credo Technology, and Macom (MTSI) are expected to gain significant profits from this AI boom.
However, Bank of America has also identified potential risks for chip stocks. The Alia team stated that although the overall outlook for the semiconductor market remains optimistic, there are still many unknown factors in 2025, among which the biggest risk factors are concentrated in the growth of market demand related to AI and the broader macroeconomic recovery situation. In addition, given the accelerated penetration of AI applications into business operations and the daily lives of individual consumers, the "rotation market" of software stocks benefiting from AI will continue in 2025. This trend may create intermittent pressure on the rise of popular chip stocks, driving funds to profit from AI chip stocks and shift towards AI software stocks.