Semiconductors are critical in helping address AI backlogs, says BofA's Vivek Arya
Speakers
Vivek Arya
— Analyst, BofA Securities
Summary
Vivek Arya, BofA Securities senior semiconductor analyst, argues the semiconductor cycle is more durable than past cycles due to strong AI demand and disciplined supply. He highlights that the SOX index rally is earnings-driven and that NVIDIA, Broadcom, and Micron trade below market multiples with room to rise.
- Debate shifted from demand justification to supply constraints.
- Semiconductor demand from AI infrastructure is exceptionally high.
- Supply is disciplined with only one leading-edge wafer supplier (TSMC).
- The SOX index rally is driven by earnings, not multiple expansion.
- NVIDIA, Broadcom, and Micron trade below market multiples.
- Hyperscalers must invest in computing infrastructure to sustain growth.
- Valuations are not out of control compared to growth rates.
Ideas
Semiconductor cycle durable, earnings growth justifies.
The semiconductor cycle is more durable than past cycles because demand from AI and hyperscaler infrastructure is exceptionally high (e.g., 100% GPU utilization, no dark compute) and supply is disciplined (only one leading-edge wafer supplier, TSMC). The SOX index's rally is driven by earnings growth, not multiple expansion, and valuations remain reasonable relative to growth rates.
Nvidia, Broadcom, Micron below market multiple.
NVIDIA, Broadcom, and Micron are the three largest companies in my coverage and all trade below the market multiple despite strong earnings growth. The growth rates justify further upside, making them attractive investments.
