While investors assess whether a potential slowdown in artificial intelligence development could weaken demand for chips and data-centre infrastructure, Bank of America analyst Vivek Arya is taking a longer-term view, forecasting a sharp expansion in the semiconductor industry over the coming years.
Arya expects the total addressable market for the semiconductor industry to reach $3.2 trillion by 2030, compared with an estimated $1.7 trillion this year, MarketWatch reported.
He sees memory chips and data-centre demand leading the expansion, alongside recoveries in the automotive and industrial sectors.
The bullish long-term outlook comes after a volatile week for semiconductor stocks, as concerns about the pace of AI development triggered a sharp selloff before the sector partially recovered.
AI demand remains resilient
Investors have recently worried that companies such as Anthropic and OpenAI could reduce hardware spending if they slow the development and training of large language models.
Arya, however, said he sees little evidence of an immediate deterioration in demand.
The BofA analyst said he sees “no signs of slowing” in customer orders, long-term agreements, supply commitments and chip pricing despite recent market jitters.
In a note to clients, Arya said next year “remains much a fully booked/contracted year” for providers of computing power, networking components and memory chips.
He also expects 2028 to “remain tight” as demand continues to absorb available capacity.
That outlook suggests that any moderation in the pace of AI model development may not immediately translate into weaker semiconductor demand, particularly given existing commitments for computing and infrastructure.
Chip stocks recover after sharp selloff
The semiconductor sector came under heavy pressure on Monday after AI industry leaders warned about potentially existential risks from the technology, raising concerns about the sustainability of the infrastructure boom.
The Philadelphia Semiconductor Index dropped more than 5%, while major chipmakers including Nvidia, Advanced Micro Devices and Micron fell sharply.
The selling extended to semiconductor equipment companies such as Lam Research and Applied Materials, while tech utility company Bloom Energy also experienced significant moves.
The sector regained some ground on Tuesday, with the Philadelphia Semiconductor Index closing 0.4% higher.
Arya expects the semiconductor sector could remain “range-bound” in the near term, with the US midterm elections and broader macroeconomic conditions likely to influence trading.
Against that backdrop, he expects “greater resilience” from AI and analog chipmakers as well as networking companies.
Memory shortages could drive growth
Arya sees memory demand as one of the major drivers of the semiconductor industry’s longer-term expansion.
“Memory-chip shortages and price inflation remain a critical lever behind industry growth upside,” Arya wrote.
He also sees “a brighter outlook” for traditional and AI server manufacturers as demand for computing infrastructure continues to grow.
Once semiconductor momentum strengthens, Arya expects Micron Technology, Intel and equipment makers Lam Research and Applied Materials to lead the sector.
The PHLX Semiconductor Index has already gained about 56% this year.
Yet Arya argues that semiconductor stocks remain relatively attractive compared with growth stocks more broadly.
“Semis still screen attractively relative to growth,” Arya said, pointing to the sector’s valuation relative to its expected profit growth.
He noted that semiconductors are trading at a lower valuation than the S&P 500 despite significantly stronger anticipated earnings growth.
Fab equipment market set for expansion
The bullish outlook extends beyond chipmakers to the companies supplying the equipment needed to manufacture semiconductors.
Arya raised his expectations for the total addressable market for wafer-fabrication equipment to $156 billion this year and $210 billion next year.
The increase reflects growing demand for wafers used to produce both logic and memory chips.
By the end of the decade, Arya sees the wafer-fab equipment industry potentially reaching $360 billion in revenue, supported by new generations of chip-manufacturing technology and expanding clean-room capacity for memory and storage components.
For investors, the projections point to a semiconductor industry whose growth could extend well beyond the current AI cycle.
While the sector may remain volatile in the near term as markets digest questions over AI spending, higher borrowing costs and macroeconomic risks, Arya’s longer-term outlook rests on several sources of demand.
Memory shortages, expanding data-centre infrastructure, recovering automotive and industrial markets and continued advances in chip manufacturing could collectively drive the industry’s total addressable market from $1.7 trillion this year to $3.2 trillion by 2030.
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