Buy these 3 stocks to ride a 2nd wave of AI frenzy as accelerators outperform, BofA says

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  • There’s extra to the inventory market’s AI commerce than simply shopping for Nvidia, in line with Financial institution of America.

  • The financial institution highlighted three second-tier winners that ought to profit from the rising adoption of AI.

  • “Rising tide may create worthwhile area of interest for subsequent tier of distributors,” Financial institution of America mentioned.


Whereas the inventory market’s synthetic intelligence commerce has wildly benefitted chipmakers like Nvidia and Broadcom, there’s a secondary tier winners that ought to see additional upside, in line with Financial institution of America.

“Rising tide may create worthwhile area of interest for subsequent tier of distributors,” Financial institution of America’s Vivek Arya mentioned in a be aware on Sunday.

Arya noticed that the accelerator market, which allows the complicated inside workings of generative AI chatbots, ought to double over the following three years to about $200 billion.

The speedy progress in that market “may create risky however fruitful alternatives among the many #2 distributors,” Arya mentioned.

“Every ‘junior samurAI’ trades apparently at a valuation premium to its respective chief, so larger inventory volatility is to be anticipated. Nonetheless, because the chief expands the market TAM, the junior can probably proceed to carve a worthwhile area of interest,” Arya mentioned.

There are three “Purchase” rated shares that Arya believes will profit from the rising adoption of AI.

1. Marvell Know-how

Marvell Know-how gives information infrastructure-focused semiconductor options and helps tech firms construct customized chips. The corporate ought to provide extra particulars about its AI technique at its upcoming analyst day on April 11.

Arya thinks the analyst day will probably be a constructive catalyst for the inventory, as he expects the corporate will information for about 10% long-term share of the $20 to $30 billion customized AI chip market, which might be nicely above consensus estimates of lower than 5% share.

Arya mentioned Micron may additionally spotlight its AI Ethernet switching enterprise, which is a market that might double to as a lot as $7 billion by 2027. Marvell at the moment has a 5% share out there.

“MRVL’s execution has been spotty the previous few quarters however our latest assembly suggests potential for legacy roughing near-term,” Arya mentioned.

Financial institution of America reiterated its $95 value goal, representing potential upside of 30%.

2. Micron

Excessive-bandwidth reminiscence is crucial for the rising adoption of AI, and it is making a dynamic that has by no means occurred within the reminiscence market. That is nice information for memory-chip producer Micron.

“Normally new reminiscence demand cycles are met with a provide response, main inevitably to stock and value stress. Excessive-bandwidth reminiscence, important to AI, is maybe the primary reminiscence expertise that’s quickly consuming into the availability, consuming 3x the quantity of wafer vs. conventional DDR DRAM reminiscence,” Arya mentioned.

Arya estimated that the high-bandwidth reminiscence market will develop at a 48% compounded annual progress price by 2027 to greater than $20 billion.

“Reminiscence business additionally stands to learn as AI expands to the sting, by way of higher-spec’d smartphones, PCs and different good/linked gadgets,” Arya mentioned.

Financial institution of America raised Micron’s value goal to $144 from $120, representing potential upside of 15%.

3. AMD

AMD’s consistency in execution offers Arya confidence that it could preserve a 5% to 10% share within the AI accelerator market that Nvidia dominates.

“That is decrease than the 20% share alternative some bulls would argue for, however we argue AMD is being flanked on 3 sides – from chief NVDA with its incumbency/scale and well-priced Blackwell merchandise, from customized chips with their lower-price/greater optimization, and from a number of start-ups going after market niches,” Arya mentioned.

Nonetheless, whereas AMD is taking part in catch up within the AI market, “we anticipate it to leverage its chiplet structure to maneuver sooner to the 3nm node for CY26 AI merchandise,” Arya mentioned.

Financial institution of America reiterated its $195 value goal, representing potential upside of seven%.

Learn the unique article on Enterprise Insider

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