Bank of America Securities analyst Vivek Arya has raised his confidence in the U.S. semiconductor sector's robust growth prospects after engaging with numerous industry leaders at the Consumer Electronics Show (CES) in Las Vegas. His outlook reflects a convergence of long-term secular demand catalysts, near-term cyclical factors, and sustained pricing strength among chip manufacturers.
The analyst maintains an optimistic projection of approximately 30% year-over-year growth for the semiconductor industry, anticipating its first trillion-dollar annual sales milestone. This outlook is underpinned by insights drawn from over a dozen management meetings during CES, where exploratory yet promising developments in physical AI and robotic applications were observed.
According to Arya, three principal elements support this positive industry trajectory: visibility into both near- and medium-term demand, secular expansion fueled by AI advancement coupled with cyclical inventory restocking in industrial sectors, and strong pricing power that enables chipmakers to effectively transfer rising supply chain costs to customers. This pricing leverage acts as a crucial margin support amid escalating wafer and memory-related expenses.
Among the executives met, Arya noted particularly positive sentiment from Nvidia Corporation (NASDAQ: NVDA), Credo Technology Group Holding Ltd (NASDAQ: CRDO), Microchip Technology Inc (NASDAQ: MCHP), Analog Devices Inc (NASDAQ: ADI), and Micron Technology Inc (NASDAQ: MU). Meanwhile, firms such as Marvell Technology, Inc (NASDAQ: MRVL), ON Semiconductor Corp (NASDAQ: ON), Ambiq Micro, Inc (NYSE: AMBQ), Qualcomm Inc (NASDAQ: QCOM), Skyworks Solutions, Inc (NASDAQ: SWKS), Intel Corp (NASDAQ: INTC), and Ambarella Inc (NASDAQ: AMBA) experienced sentiment aligning more with expectations.
Despite ongoing concerns regarding potential market overvaluation or bubble-like conditions, the Philadelphia Semiconductor Sector Index (SOX) has exhibited notable strength, appreciating approximately 7% year-to-date and 45% over the previous twelve months, substantially outperforming the broader S&P 500 index. This performance indicates investor interest driven by multiple sector growth themes at both the secular and cyclical levels.
Nvidia’s Strategic Advantage in AI Market
Arya emphasizes Nvidia’s unmatched leadership position within the chip industry, reinforced by participation in investor engagements including a dinner with CFO Colette Kress and an industry panel during Nvidia’s CES keynote. The analyst highlights Nvidia’s full-stack artificial intelligence strategy, extensive scale of operations, and robust financial resources.
Particularly notable is Nvidia’s planned research and development expenditure, projected to reach approximately $26 billion in calendar year 2026 alone. This level of investment surpasses the combined R&D spending of several major competitors including Broadcom Inc (NASDAQ: AVGO), Advanced Micro Devices, Inc (NASDAQ: AMD), and Marvell, reflecting Nvidia’s commitment to innovation and competitive moat expansion.
During the event, Nvidia revealed progress on its forthcoming Vera Rubin platform, anticipated to commence shipment in the second half of the year. This new product is expected to dramatically enhance AI processing performance, offering 3.5 times the training capabilities and 5 times the inference speed relative to its predecessor, Blackwell.
Arya also points to promising demand trends, highlighting that combined orders for the Blackwell and Vera Rubin platforms in 2025 and 2026 could approach $500 billion, underscoring substantial market appetite. Moreover, although manufacturing costs for wafers and memory components are rising, Nvidia plans to sustain gross margins in the mid-70% range, a margin level considered industry-leading.
Additional upside potential is associated with expected shipments of China-focused H200 chips, which could exceed $40 billion contingent upon regulatory approvals. Given these factors, Arya reiterates a Buy rating on Nvidia, designating it as his top choice in the semiconductor sector based on attractive forward valuation metrics, including a price-to-earnings-growth (PEG) ratio significantly below those of large-cap peers.
Credo Technology’s Market Position Amid Sell-Off
Meetings with Credo Technology Group executives reinforced Arya’s Buy recommendation, despite the stock trading approximately 34% below its 52-week peak. Credo specializes in active electrical cables, essential components for AI cluster scalability, positioning the company well within a critical segment of the AI infrastructure market.
The analyst notes that this recent market correction presents an appealing entry opportunity as Credo’s solutions enable extended usability of copper connectivity. This attribute resonates with hyperscale data center operators who favor proven, reliable deployment technologies over less mature alternatives.
Credo’s management addressed market concerns related to potential order reductions by Taiwan Semiconductor Manufacturing Company (TSMC), competitive threats from peer firms, and substitution risks arising from emerging co-packaged optics technologies. The company maintained confidence in its competitive positioning amid these challenges.
Analog Devices Retains Strong Pitch from Pricing Autonomy
Arya sustained his Buy rating on Analog Devices, consistent with designating it as his preferred pick within the analog chip segment. Conversations with the company’s leadership revealed successful implementation of list-price increases targeting channel customers, reflective of resilient pricing power.
This pricing strength is attributed to Analog Devices’ portfolio of differentiated products, advantageous exposure to sectors such as aerospace, defense, and AI, and corrective pricing actions following prior input cost inflation. These factors collectively contribute to a compelling investment proposition.
Despite a cautious stance on the broader analog market due to macroeconomic uncertainties, Analog Devices is distinguished by its combination of robust free cash flow generation, pricing leverage, and shift towards a more favorable product mix. This balance enhances its capacity to navigate both defensive and offensive market dynamics.
Conclusion
The semiconductor sector continues to demonstrate significant momentum supported by robust secular trends in AI, cyclical inventory rebuilds, and the ability of chipmakers to maintain pricing power amid supply cost pressures. Nvidia’s leadership role is underscored by its wide-ranging AI platform strategy and record-setting R&D commitment, while emerging players like Credo and established analog specialists like Analog Devices also benefit from structural and tactical advantages.
Investors should remain attentive to potential risks including regulatory approvals impacting supply chains, shifts in competitive dynamics, and macroeconomic conditions influencing capital spending. Nevertheless, the sector’s outlook is bolstered by diverse growth drivers and resilient industry fundamentals, as evidenced by ongoing sector index outperformance relative to broader market benchmarks.