The question that hung over artificial-intelligence stocks for most of last year, whether the hundreds of billions of dollars spent from hyperscalers and flowing into data centers would ever pay off, has effectively been settled, according to Bank of America.



In a note published Monday, BofA Securities analyst Vivek Arya wrote that the worry now isn't whether AI spending earns a return, but whether chipmakers can keep up with demand. 



“Despite ongoing volatility from geopolitics and rates, we see semiconductors as one of the most powerful secular calls for sustained outperformance in the AI era,” Arya said. 



Arya believes that the case for investing in chip stocks remains strong, as “scarcity drives secular upside,” and has named seven stocks to play this theme.



They are Nvidia Corp. (NASDAQ:NVDA), Credo Technology Group Holding Ltd (NASDAQ:CRDO), Analog Devices Inc. (NASDAQ:ADI), Texas Instruments Inc. (NASDAQ:TXN), KLA Corp. (NASDAQ:KLAC), Microchip Technology Inc. (NASDAQ:MCHP) and Cadence Design Systems Inc. (NASDAQ:CDNS) — all rated Buy.



<h2>From ‘Will It Pay Off' To ‘Can We Keep Up'</h2>



AI usage has exploded: token consumption — the work a model does — is up roughly sevenfold in a year, and Google AI queries are up more than 300%. 



Agentic software, which runs multi-step tasks on its own, can burn 10 to 1,000 times more tokens than a single chat, turning everyday use into a steady pull on computing power.



Arya also brushed off the fear that hyperscalers raising record cash is a warning sign. 



Chip cycles peak on oversupply, not on financing, he wrote — and with power, land, wafers and memory all scarce, capacity simply can't be overbuilt fast enough to flood the market.



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<h2>A $1.7 Trillion Prize By 2030</h2>



The bank sees the market for AI data center gear topping $1.7 trillion by 2030, up from about $264 billion in 2025. 



AI chips alone would account for roughly $1.2 trillion of that. 



Combined spending by the top five U.S. cloud companies – including Alphabet Inc. (NASDAQ:GOOGL), Microsoft Corp. (NASDAQ:MSFT), Amazon.com Inc. (NASDAQ:AMZN), Meta Platforms Inc. (NASDAQ:META) and Oracle Corp. (NYSE:ORCL) should hit about $771 billion next year, up some 68%.



<h2>Seven Names, One Trade</h2>



The seven share a setup: solid fundamentals plus room to catch up after lagging the broader chip index this year. 



Nvidia has the most upside to BofA's target — its $350 price objective sits about 71% above where the stock traded when the note came out. 



Microchip and Texas Instruments offer roughly 38% and 30%; Credo about 22%, Analog Devices 15%, KLA 9% and Cadence 6%.



To be sure, the boom has a weak spot. 



Hyperscalers are now spending almost every dollar they earn on data centers — 95% to 100% of it through 2028, versus a third to a half in the past — leaving almost no spare cash by 2027. 



OpenAI's revenue is soaring. The company expects it to climb from $13 billion in 2025 to $283 billion by 2030. Losses should also climb, as the company’s cumulative computing spend is about $665 billion over the period.



According to Arya the real question isn't whether they can pay for the buildout. It's whether enough demand shows up to fill it.



&#34;The key risk is not financing, but whether demand continues to absorb incremental supply as capacity expands,&#34; he wrote.



Still, BofA expects spending to hold up through 2027. Companies are funding it with cash they generate rather than debt, and much of it is already locked into long-term contracts.



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Image: Shutterstock

KLAC

NVDA

BofA analyst Vivek Arya identifies a secular upside in chip stocks, shifting the AI investment focus from ROI to supply scarcity. He recommends seven 'Buy' rated stocks—Nvidia, Credo, Analog Devices, Texas Instruments, KLA, Microchip, and Cadence—citing strong demand and limited capacity. Nvidia shows the highest potential upside at 71%, while the AI data center market is projected to reach $1.7 trillion by 2030.

- Bank of America analysts indicate that concerns about the profitability of AI investments have shifted to whether chipmakers can meet demand.  
- They project the AI data center market will reach $1.7 trillion by 2030, with AI chips comprising about $1.2 trillion of that total.  
- Seven chip stocks are recommended for investment, including Nvidia and Texas Instruments, as demand for computing power continues to escalate, despite fears of financing and capacity constraints.

Nvidia And Other 6 Chip Stocks Set For A 'Secular Upside,' Analyst Says