Wells Fargo made its boldest call yet on the semiconductor sector Thursday, upgrading three major chip names and forecasting that industry revenue will crack the trillion-dollar barrier in 2026 as artificial intelligence transforms computing from data centers to smartphones.

The bank elevated Broadcom, Analog Devices, and Monolithic Power Systems to Overweight from Equal-weight, arguing that concerns weighing on the stocks are "overdone" and that the AI infrastructure buildout will drive years of sustained growth. Shares of all three rallied on the news, with Broadcom gaining 2.6 percent, Analog Devices rising 1.5 percent, and Monolithic Power Systems jumping 4 percent.

The Trillion-Dollar Threshold

At the heart of Wells Fargo's optimism is a sweeping industry forecast that projects 2026 semiconductor revenue of $1.02 trillion—up 29 percent from 2025 levels. The bank's semiconductor analyst Aaron Rakers pointed to AI demand indicators, wafer-fab-equipment forecasts, and a proprietary token-driven supply-and-demand model as supporting the bullish outlook.

"We believe the semiconductor sector remains positioned for further gains despite strong year-to-date performance," the firm wrote in its research note. For Broadcom specifically, Wells Fargo dismissed margin concerns as "overdone" while highlighting "Google TPU upside + significant additional custom XPU ramps" as catalysts.

"Google TPU upside + significant additional custom XPU ramps provide multiple paths to beat expectations."

— Wells Fargo research note on Broadcom

Broadcom: The Custom Silicon Kingmaker

Wells Fargo's Broadcom upgrade carries particular significance given the company's position as the leading designer of custom AI chips for hyperscale cloud providers. The bank raised its price target to $430 from $410 and boosted its revenue and earnings estimates substantially.

Wells Fargo's Revised Broadcom Estimates

  • 2026 Revenue: Raised to $100.3 billion from $97.0 billion
  • 2026 EPS: Raised to $10.80 from $10.36
  • 2027 Revenue: Raised to $143.8 billion from $130.5 billion
  • 2027 EPS: Raised to $15.35 from $13.90

The upgrade came at an opportune moment for Broadcom, whose shares had slid more than 4 percent Wednesday after Reuters reported that Beijing had ordered local companies to halt use of cybersecurity software from American and Israeli firms, including VMware—a Broadcom subsidiary. Thursday's Wells Fargo endorsement helped the stock recover some of that lost ground.

AMD Emerges as Top Pick

While the Broadcom upgrade grabbed headlines, Wells Fargo also named Advanced Micro Devices its top semiconductor pick for 2026. The bank sees AMD benefiting from the same AI tailwinds driving Nvidia's success while trading at a more attractive valuation.

The semiconductor landscape has shifted dramatically over the past three years, with companies that can demonstrate AI-related growth commanding premium valuations while traditional chip segments face more challenging conditions. Wells Fargo's upgrades reflect a conviction that Broadcom, Analog Devices, and Monolithic Power Systems all have clearer paths to AI-driven revenue than their current stock prices suggest.

Analog and Power Management Play Catch-Up

The upgrades of Analog Devices and Monolithic Power Systems highlight an often-overlooked aspect of the AI revolution: even the most advanced AI chips require sophisticated analog components and power management systems to function.

Analog Devices specializes in the high-performance analog, mixed-signal, and digital signal processing chips that convert real-world signals into data that digital systems can process. As AI systems expand from data centers into industrial applications, autonomous vehicles, and consumer devices, demand for these conversion and sensing chips is expected to surge.

Monolithic Power Systems, meanwhile, designs power management semiconductors that have become increasingly critical as AI chips consume ever more electricity. The company's products help manage heat and power delivery in the dense server environments that AI training requires.

The Bigger Picture

Wells Fargo's upgrade wave arrives as the semiconductor industry approaches a historic milestone. Breaking the trillion-dollar revenue threshold would cement chips' status as the foundation of the modern economy—essential not just for computing but for transportation, healthcare, energy, and virtually every other sector.

For investors, the message is clear: despite years of strong gains and elevated valuations, the bank sees substantial upside remaining in semiconductor stocks. The AI buildout is not a one-year story but a multi-year transformation that will require trillions of dollars in chip purchases.

Whether the industry can actually deliver on these ambitious forecasts will depend on factors ranging from global economic conditions to geopolitical tensions over chip manufacturing in Taiwan. But for now, at least one major Wall Street bank is betting that the silicon age is far from its peak.