3 reasons why BofA expects compute stocks to ’re-energize’

Investing.com -- Bank of America expects compute-focused semiconductor stocks to regain momentum as artificial intelligence investment continues to accelerate, pointing to three key factors highlighted by hyperscalers.

"We expect compute stocks to re-energize based on constructive AI capex commentary from hyperscalers highlighting three points," stated BofA analyst Vivek Arya.

He wrote in a note to clients on Monday that “chip stocks are off to a solid start,” with the SOX index up about 13 percent this year, marking its second-strongest January in two decades.

Despite that rally, he highlighted that “compute leaders NVDA and AVGO” have not yet participated meaningfully.

According to BofA, the backdrop for renewed strength in compute stocks rests on “constructive AI capex commentary” from major cloud players.

Arya mentioned hyperscalers emphasised that “AI investments [are] critical to sustaining double-digit growth,” that sales “would have been even higher if it were not for supply constraints,” and that there is “no evidence of a ‘bubble.’”

The bank also highlighted 2026 as a potential turning point for industry workloads. “CY26 could mark the year when inference becomes a larger workload,” Arya said, adding that inference could eventually represent “75% of $1.2 trillion” in annual AI capex by 2030.

Nvidia remains “in the lead” across training and inference, while Broadcom is “well aligned with Google, Anthropic” and new opportunities at OpenAI, Apple and xAI. AMD, meanwhile, is viewed as “a credible second source.”

BofA believes the broader AI ecosystem, spanning compute, memory and semiconductor equipment, should continue to benefit, even as optical-component stocks appear overextended.

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