Amidst market panic of "AI stock market peak", Bank of America backs AI investment cycle to continue until 2028.

Bank of America Corp released a heavy research report on Tuesday, with analyst team led by Vivek Arya significantly raising the target stock prices of multiple semiconductor companies including Intel Corporation (INTC.US), Arm Holdings (ARM.US), and Micron Technology, Inc. (MU.US), citing that the visibility of artificial intelligence-related spending has clearly extended to 2028. This report has gained widespread attention on Wall Street - in the midst of global semiconductor stocks experiencing turbulent adjustments, Bank of America's forward-looking view extends to 2028, casting the most firm vote for the sustainability of AI capital expenditure cycles. WFE forecast significantly raised: expected to reach $250 billion in 2028 In this research report, Bank of America made a significant revision to the expenditure forecast for wafer fab equipment (WFE): Bank of America also raised the WFE forecast for 2029 and 2030 to $268 billion (+7%) and $292 billion (+9%), respectively. The analyst team provided three main reasons for the upward revision: First, cleaner room availability is increasing. With the gradual progress in the construction of global wafer fabs, the previous bottlenecks in capacity expansion are easing, providing more space for equipment installation. Second, high visibility brought by Long-Term Agreements (LTA). Long-term supply agreements signed by memory chip manufacturers with downstream customers provide unprecedented certainty for capital expenditure decisions, allowing equipment procurement plans to be locked in advance. Third, key technology inflection points raising WFE intensity per wafer. In the cyclical upgrades of memory and logic devices, the demand density for equipment continues to rise with advanced processes. Bank of America also pointed out that the progress of Intel Corporation and Samsung in advanced wafer foundry and logic device capacity, as well as the potential contribution of the Terafab project, have injected a stimulant into the industry. It is worth noting that Bank of America is not the only investment bank optimistic about the outlook of WFE. JPMorgan Chase had previously raised its global WFE growth forecast from 21% to 28% in 2026 and further expects a 29% increase in 2027, with a sustained growth of 16% in 2028. Wells Fargo & Company also synchronized the WFE forecasts for 2027 and 2028. Optimistic expectations on the semiconductor equipment cycle in Wall Street are resonating. Industry TAM raised to $2.7 trillion: 28% five-year compound annual growth rate In this report, Bank of America also raised the total addressable market (TAM) expectation for the semiconductor market from the previous $2.3 trillion to a significant $2.7 trillion, indicating a compound annual growth rate of 28% from 2025 to 2030. The Bank of America analysts stated in the report: "It took approximately 50 years for the semiconductor industry to achieve its first trillion-dollar sales, and we expect artificial intelligence to help the industry add another trillion dollars in sales in just five years." The growth drivers primarily come from three main areas: Memory: Bank of America expects a nearly 300% year-on-year growth rate in 2026 alone, making it the largest growth engine; Data centers: The addressable market size for AI data center systems is expected to grow from $273 billion in 2025 to approximately $1.7 trillion by 2030; Revival in the automotive and industrial sectors: The cyclical recovery of the two major traditional semiconductor consumption markets is accelerating. Bank of America also identified five major themes that will drive the semiconductor industry to the next trillion dollars in sales: AI data center systems, memory markets supported by long-term supply agreements, semiconductor capital equipment and reshoring manufacturing, growth in analog chips driven by the surge in AI power demand, and the demand for intelligent CPUs (Bank of America estimates a $170 billion server market opportunity collectively represented by x86 and ARM architectures). Portfolio adjustments: significant upward adjustment in target prices for multiple core semiconductor stocks Based on a comprehensive reconstruction of the semiconductor camp covering the industry scale and underlying logic, Bank of America made a rare large-scale upward adjustment to the target prices of the covered semiconductor companies. The most notable adjustment is for Micron Technology, Inc. - the target price was raised from $950 to $1500, representing a 58% increase. Bank of America believes that the strong demand for High Bandwidth Memory (HBM) and the structurally tight supply situation are expected to continue until 2028. This assessment is highly consistent with market trends: Deutsche Bank Aktiengesellschaft had previously raised Micron's target price from $1000 to $1500, and Citigroup had raised it from $840 to $1200. The target price for Intel Corporation was raised from $135 to $160. This is the second significant increase in Intel Corporation's target price by Bank of America in just two weeks - on June 11, Bank of America had upgraded Intel Corporation's rating from "underperforming the market" directly to "buy", and raised the target price from $96 to $135. This latest increase to $160 reflects Bank of America's continued confidence in Intel Corporation's server CPU business and wafer foundry business prospects. The target price for Arm Holdings was raised from $335 to $460, but Bank of America maintained a "neutral" rating. Earlier in mid-June, Bank of America had raised Arm's target price from $245 to $335. The target price for Applied Materials was raised from $540 to $720, Lam Research from $330 to $480, KLA from $210 to $317 - the three major equipment suppliers all benefit significantly from the upward revision in WFE expenditure expectations. The only exception was Axcelis Technologies: the target price was raised from $130 to $156, but Bank of America maintained an "underperforming the market" rating, believing that even considering the potential profit enhancement from the pending merger with Veeco, the current valuation of the stock already fully reflects the related positives. During the downturn of tech stocks, Bank of America hedges against the "AI ebb tide" with technological visibility On Monday, AI computing infrastructure stocks in the US plummeted collectively, leading to a significant drop in global stock markets on Tuesday, which could be described as experiencing a "black Tuesday". On Tuesday, tech stocks in the US continued their decline at the opening. Concerns about the sustainability of the AI investment bubble resurfaced in the market, with some speculative forces around high leverage strategies and investors focusing on high-frequency short-term trading positions withdrawing from the overcrowded AI computing-related tech stocks that have performed strongly so far this year, while waiting for further positive progress in peace talks between the US and Iran. The root cause of this sell-off is the market's reevaluation of the sustainability of AI investment frenzy. Over the past few quarters, tech stocks have surged due to the AI investment craze, but with high borrowing costs being maintained, investors are beginning to focus on whether companies can translate their massive AI capital expenditure into actual profits. In this context, some analysts have even put forward pessimistic views that "AI investments may peak in the next two years". Therefore, Bank of America's overall bullish stance comes at a time when the semiconductor sector is going through a significant adjustment. Since the beginning of this quarter, the Philadelphia Semiconductor Index has fallen by about 15% from its high point, with doubts lingering in the market about the sustainability of AI capital expenditure. The core contribution of Bank of America's report lies in extending the timeline to 2028, with unexpected data on WFE and TAM, powerfully demonstrating that AI is not a short-term bubble, but is entering the deep-water area of infrastructure construction. From a individual stock perspective, Bank of America's target price adjustments are not unfounded. Taking Micron as an example, in April 2026, global semiconductor sales soared by 106%, marking the strongest monthly growth since 1994, driven mainly by the rise in DRAM and NAND prices. Intel Corporation's 18A advanced process has entered the risk production stage, and the outlook of its external foundry business is being reassessed by the market. From Bank of America's report, it is clear that Wall Street is shifting its focus from short-term "internet giant earnings noise" to a more hardcore infrastructure construction rigid cycle. The wide adoption of Long-Term Agreements (LTA) signifies that downstream major customers are "locking in" capacity for the next few years with real money, while the iteration of process nodes demonstrates the high counter-cyclical capital elasticity of wafer fab equipment (WFE). Therefore, Bank of America's comprehensive upward revision of semiconductor target prices sends a clear signal: AI infrastructure investment is transitioning from the "concept speculation" stage to the "real money" capacity building stage.