The artificial intelligence boom isn’t cooling off — it’s getting bigger, Bank of America analyst Vivek Arya contends.
While AI skeptics have pointed to eye-popping valuations as a reason to run, Arya said the industry is only at the “midpoint” of a decade-long transformation, and it’s being led by Nvidia (NVDA) and Broadcom (AVGO).
In a report titled “2026 Year Ahead: choppy, still cheerful,” Arya forecast a 30% year-over-year surge in global semiconductor sales that will finally push the sector past a historic $1 trillion annual sales milestone in 2026.
Arya noted a strong belief in companies with “moats that are quantified by their margin structure.” In addition to Nvidia and Broadcom, he highlighted four other large-cap semiconductor companies — Lam Research (LRCX), KLA (KLAC), Analog Devices (ADI), and Cadence Design Systems (CDNS) — as his top picks for 2026.
“I often say that investing in semis is very simple,” Arya told reporters on a Dec. 19 call. “You don’t need any sell-side analyst to do that. Just take all your companies, sort them by gross margins, and buy the top five, and you’re not going to be that wrong.”
BofA estimates that the total addressable market for AI data center systems will reach over $1.2 trillion by 2030, representing a compound annual growth rate of 38%. AI accelerators alone represent a $900 billion opportunity.
Despite these staggering figures, the market remains cautious because AI data centers are expensive. A typical 1 gigawatt facility requires upwards of $60 billion in capital expenditures, with roughly half of that going directly to hardware, per Bank of America.
That raises the question: Will the return on investment ever materialize?
Read more: How to protect your portfolio from an AI bubble
Arya remained optimistic, arguing that current spending is both “offensive and defensive.” In other words, Big Tech has no choice but to invest to protect its existing empires.
Nvidia — the world’s largest company by market cap — is currently operating in a “different galaxy,” Arya said.
With Nvidia shares up over 40% year to date, Arya warned against comparing the AI leader to traditional chipmakers. While the average chip is priced at $2.40, an Nvidia graphics processing unit (GPU) sells for roughly $30,000.
And although some fear Nvidia’s market cap has hit a ceiling, BofA pointed to free cash flow — projected to hit half a trillion dollars over the next three years — and a valuation that is “still incredibly cheap” when adjusted for growth.
