BofA names top semiconductor stocks to buy after sector selloff

Investing.com -- Bank of America says the semiconductor sector is trading at its most attractive valuation in years following an 18% Philadelphia Semiconductor Index underperformance against the S&P 500. This scenario has offered investors an unexpected buying opportunity, analysts led by Didier Scemama said in a note Monday.

"Given strong fundamentals, we think the sector looks highly attractive trading on c3x discount to average '28 css multiples and semicaps specifically at 6-7x discount," Scemama wrote. "We see enhanced buying opportunities for Semicaps where visibility is the highest."

According to BofA's analysis, the current peak-to-trough SOX underperformance of roughly 18% tracks the 2015 China slowdown episode (minus 17.3% underperformance) and the 2018 U.S.-China trade tension and Fed hiking cycle (minus 17%), while remaining well short of the approximately 30% drawdowns associated with full cyclical downturns in 2011/12, 2022, and 2024/25.

BofA frames the current selloff as trade-tension-driven rather than a fundamental deterioration, a distinction it argues the market is misreading.

At the center of BofA's bull case is a forecast for Wafer Fab Equipment spending to reach at least $250 billion in 2028, implying two consecutive years of approximately 30% year-over-year growth.

The bank grounds that projection in long-term supply agreements signed across major AI logic and memory customers, citing a reported Samsung-Broadcom five-year, $200 billion foundry deal as one anchor, alongside higher capital expenditure announcements from TSMC and Intel in recent weeks.

BofA also pushed back firmly on one of the sector's persistent bear arguments: "Fears of memory pricing crash seem unfounded in our view given LTAs signed by all major hyperscalers, automotive and consumer OEMs."

ASML is BofA's preferred European large-cap expression of the theme. The bank maintains a Buy rating, citing higher average selling prices and gross margins as structural supports. BofA's CY2027 and CY2028 EPS estimates for ASML sit 6-7% above Street consensus, based on the firm's own projections, which have not been independently verified.

For ASM International, BofA said it expects 11% upside to consensus Q2 EPS expectations when the company reports after the European close on Tuesday, driven by TSMC and Intel capital expenditure increases, China end-market strength, and a nascent recovery in analog and power semiconductor demand.

STMicroelectronics rounds out BofA's Buy-rated semicap names, though the bank acknowledged investor frustration.

"While the market has been clearly disappointed by STM's more gradual margin leverage, we think that its earnings power of $4.50+ in CY28E remains intact," BofA wrote, pointing to a book-to-bill ratio at 2x, manufacturing efficiencies expected to add 4 percentage points of gross margin by mid-2028, and product cycles in optical components and low-earth-orbit satellites as the pillars of that thesis.

Beyond equipment, BofA also flagged Nokia as a Buy-rated stock on the basis of an under-appreciated order intake of €2.8 billion. The bank rates Ericsson and Logitech Underperform, citing concerns about margins and growth prospects for both names.

You May Also Be Interested In

• S&P Dow Jones Indices adds Bloom Energy to S&P 500 index
• Arcosa stockholders approve $150-per-share cash buyout by CRH
• Lynx Equity sees Micron and SanDisk breakout as volatility normalizes