The semiconductor industry is about to hit a milestone that once seemed decades away. Bank of America analyst Vivek Arya is forecasting that global chip sales will surge 30% year-over-year in 2026 to finally break the $1 trillion annual sales barrier—a historic first for the industry.

In a research note titled "2026 Year Ahead: Choppy, Still Cheerful," Arya identified six large-cap semiconductor stocks he believes are best positioned to capture the bulk of that growth. His thesis: the artificial intelligence boom isn't cooling off—it's only getting started.

The Top Six for 2026

Arya's picks aren't meant to be a diversified portfolio. Instead, he selected companies with dominant market positions, typically commanding 70% to 75% share in their respective niches:

  • Nvidia (NVDA): The undisputed AI chip leader, expected to continue dominating data center GPU sales
  • Broadcom (AVGO): A key beneficiary of custom AI chip demand and networking infrastructure
  • Lam Research (LRCX): Critical semiconductor equipment maker for advanced chip manufacturing
  • KLA Corporation (KLAC): Leading provider of process control and yield management systems
  • Analog Devices (ADI): Diversified chipmaker with exposure to industrial and automotive AI applications
  • Cadence Design Systems (CDNS): Essential software and IP provider for chip design

Why Nvidia Still Looks 'Incredibly Cheap'

Given Nvidia's stunning run—the stock is up more than 180% over the past two years—some investors have questioned whether the easy money has been made. Arya disagrees emphatically.

"Nvidia's valuation is still incredibly cheap when adjusted for growth. The stock trades at roughly 0.6x its price-to-earnings growth (PEG) ratio, compared to nearly 2x for the broader S&P 500."

— Vivek Arya, Semiconductor Analyst, Bank of America

Arya projects that Nvidia will generate half a trillion dollars in free cash flow over the next three years—a cash generation machine that justifies continued premium pricing for the stock.

The AI Midpoint Thesis

Central to Bank of America's bullishness is the belief that AI infrastructure spending is nowhere near peaking. Arya characterizes 2026 as the "midpoint of an 8-10 year journey of upgrading traditional IT infrastructure for accelerated and AI workloads."

By 2030, BofA estimates the total addressable market for AI data center systems will exceed $1.2 trillion, fueled by a 38% compound annual growth rate. Within that total:

  • AI accelerators (GPUs, custom chips): ~$900 billion
  • Supporting technologies (networking, cables, power systems): ~$300 billion

That secondary $300 billion market has prompted Arya to also highlight smaller players like Credo Technology, MKS Instruments, Advanced Energy, MACOM, and Teradyne as "unsung heroes" of the semiconductor surge.

Semiconductor Equipment: A Parallel Play

Beyond chip designers, Bank of America sees strong tailwinds for semiconductor equipment makers. The firm forecasts 10% and 14% year-over-year growth in calendar years 2026 and 2027, respectively, pushing annual equipment sales toward $131 billion and then $150 billion.

The drivers include:

  • Fab upgrades to support high-bandwidth memory
  • Transition to higher layer count NAND storage
  • Leading-edge logic production at 3nm and 2nm nodes
  • Expansion of advanced packaging capabilities

The Risks to Watch

Arya is careful to note that the path to $1 trillion won't be smooth. "No stock is riskless," he wrote, acknowledging that greater scrutiny of AI investment returns could keep share prices volatile throughout the year.

Key risks include:

  • Disappointment if AI revenue growth fails to justify massive capital expenditures
  • Geopolitical tensions affecting chip supply chains
  • Potential demand softness in non-AI segments like PCs and smartphones
  • Valuation compression if interest rates stay higher for longer

Still, for investors willing to stomach near-term volatility, Arya sees the 2026 semiconductor landscape as one of the most compelling opportunities in the market.

The $1 trillion milestone isn't just a symbolic achievement—it represents a fundamental shift in how central chips have become to nearly every sector of the global economy.