Bank of America says artificial intelligence is still the trade to make in 2026. In a Tuesday note, the bank made the case that the AI trade is still in its early to middle stages. Analysts led by Vivek Arya expect chipmakers will continue to deliver attractive, albeit choppy, returns, and said the Street consensus continues to underappreciate the “critical” mission of such stocks. “Mid-age blues in AI investments, but we forecast another year of solid 50%+ YoY growth in AI semis driven by strong data center utilization, tight supply, enterprise adoption and race between LLM-builders, hyperscale and sovereign customers,” Arya wrote, referring to large language models. “Greater scrutiny of AI returns and hyperscaler cash flows could keep stocks choppy, offset by newer/faster LLM builders and AI factories serving enterprise and sovereign customers.” Arya expects semiconductor sales to grow by about another 30% in 2026, reaching close to $1 trillion for the first time. In the same note, the analyst shared his top six large-cap stock picks in the group, with a focus on quality and sector leadership, as shown below: AI poster child Nvidia , up 32% this year, remains one of the bank’s top six for 2026. Arya’s $275 price objective implies Jensen Huang’s company could rise another 56% from current levels. Arya wrote that Nvidia is currently trading at a “compelling” valuation and at only half its growth-rate, with a solid pipeline and plenty of potential catalysts. Arya’s price target “is justified by NVDA’s leading share in fast-growing AI compute/networking markets, offset by lumpiness in global AI projects, cyclical gaming market and concerns around access to power,” he wrote. Broadcom , also rated buy, has the second-largest potential upside among Arya’s top six picks. He sees the stock climbing 47% from its Monday close, given its “double-digit EPS growth and best-in-semis profitability, [free cash flow] generation and returns.” A third stock on Bank of America’s recommended list is Lam Research . Arya’s $195 price target implies potential upside of 19%. “Our [price objective] basis is near the upper end of historical 9x-40x trading range justified by ongoing memory [wafer fab equipment] cycle, mid-teens EPS CAGR over time, etch/deposition product leadership, rising etch/deposition intensity, share gains, growing foundry/logic exposure over memory, improving prospects of NAND recovery, and robust FCF generation, offset by near-term concerns around cost inflation and tariffs,” Arya wrote.
