Finance

Bank of America Merrill Lynch says as accelerators outperform, buy these three stocks for the second wave of artificial intelligence craze


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  • Bank of America says there’s more to the stock market’s artificial intelligence trade than just buying Nvidia.

  • The bank highlighted three second-tier winners that should benefit from the growing adoption of artificial intelligence.

  • “The rising tide could create lucrative niches for next-tier suppliers,” Bank of America said.


Although artificial intelligence trading in the stock market has Chipmakers like Nvidia benefit greatly and BroadcomSecondary winners should see further upside, according to Bank of America.

“The rising tide can create profitable niches for next-tier suppliers,” Bank of America’s Vivek Arya said in a report on Sunday.

The market for accelerators, which enable the complex inner workings of generative AI chatbots, is expected to double over the next three years to approximately $200 billion, Arya observed.

The market’s rapid growth “could create unstable but productive opportunities for second-ranked suppliers,” Arya said.

Arya said: “Interestingly, each ‘junior samurAI’ trades at a higher price than its respective leader, so expect greater stock volatility. However, as the leaders expand the TAM market, it is likely that the juniors will continue to expand. Profitable niche.” .

Arya believes three stocks with a “buy” rating will benefit from the growing popularity of artificial intelligence.

1. Marvell Technology

Mayville Technology Provides data infrastructure-centric semiconductor solutions and helps technology companies build customized chips. The company should provide more details about its artificial intelligence strategy at its upcoming analyst day on April 11.

Arya believes the analyst day will be a positive catalyst for the stock, as he expects the company to capture about 10% long-term share of the $20-30 billion custom AI chip market, which would be well above consensus estimates of less than 5% share.

Micron can also focus on its AI Ethernet switching business, a market that could double to $7 billion by 2027, Arya said. Marvell currently holds a 5% share of this market.

“Execution of MRVL has been mixed over the past few quarters, but our recent meetings indicate that there is a near-term potential for legacy roughing,” Arya said.

Bank of America reiterated its price target of $95, representing a potential upside of 30%.

2. Micron

High-bandwidth memory is critical to the growing adoption of artificial intelligence and is creating dynamics that have never happened before in the memory market.This is good news for memory chip makers Micron.

“Typically a new memory demand cycle is accompanied by a supply response, inevitably leading to inventory and price pressures. High-bandwidth memory critical to artificial intelligence may be the first memory technology to quickly eat into supply and the number of wafers consumed. That’s three times as fast as traditional DDR DRAM memory,” Arya said.

Arya estimates that the high-bandwidth memory market will grow at a compound annual growth rate of 48% by 2027, reaching more than US$20 billion.

“The memory industry will also benefit as artificial intelligence extends to the edge through higher-spec smartphones, PCs and other smart/connected devices,” Arya said.

Bank of America raised its target price on Micron Technology from $120 to $144, with a potential upside of 15%.

3.AMD

AMD’s Consistency in execution gives Arya the confidence to maintain a 5% to 10% share of the AI ​​accelerator market dominated by Nvidia.

“This is lower than the 20% share opportunity some bulls argue, but we believe AMD is being attacked from 3 fronts – from leader NVDA’s position/scale and affordable Blackwell products, from lower-priced custom chips / Higher optimization, and from multiple startups pursuing market niches,” Arya said.

Still, while AMD is catching up in the AI ​​market, “we expect it to be able to leverage its small chip architecture to move faster to the 3nm node for CY26 AI products,” Arya said.

Bank of America reiterated its price target of $195, representing a potential upside of 7%.

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