- The realm of artificial intelligence within the real estate sector goes beyond mere investments in Nvidia, as per insights from Bank of America.
- The financial institution has pinpointed three secondary beneficiaries poised to capitalize on the swift integration of AI technology.
- Bank of America foresees a lucrative market emerging for the next tier of suppliers amidst the rising tide of AI adoption.
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While companies like Nvidia and Broadcom have reaped substantial rewards from the artificial intelligence segment of the stock market, Bank of America suggests that there are additional beneficiaries awaiting further growth opportunities.
Bank of America’s Vivek Arya stated, “A rising flood could create a profitable market for the second level of suppliers,” in a recent announcement.
Arya has forecasted a substantial $200 billion expansion in the pedal market over the upcoming three years, which facilitates the intricate functionalities of relational AI chatbots.
The market’s rapid advancement, according to Arya, “could potentially unveil risky yet rewarding prospects among the #2 vendors.”
Anticipated heightened stock volatility is attributed to “each ‘young samurAI’ incidentally trading at a premium to its respective leader. However, as the innovator broadens the marketplace TAM, the junior contenders could carve out successful niches,” Arya elaborated.
Arya envisions that the escalating adoption of AI will be advantageous for three companies rated as “Buy.”
1. Marvell Technology
Specializing in silicon solutions for data systems, Marvell Technology aids tech firms in developing tailored chips. The company is set to unveil more details about its AI strategy during its forthcoming researcher day on April 11th.
Arya anticipates that the analyst day will act as a positive stimulus for the stock, projecting that the company might capture around 10% of the \(20 to \)30 billion custom AI chip market, a figure significantly surpassing consensus estimates of less than 5% market share.
Pointing to Micron’s AI Ethernet switching sector potentially reaching $7 billion by 2027, Arya noted Marvell’s current 5% market share.
“MRVL’s recent performance has been lackluster, but our latest meeting hints at potential recovery in the near term,” Arya remarked.
Bank of America has reiterated its $95 target price, indicating a potential additional value increase of 30%.
2. Micron
The escalating integration of AI necessitates high-bandwidth memory, introducing a dynamic previously unseen in the memory market. This development bodes well for memory chip manufacturer Micron.
“Typically, new memory demand surges are met with a supply response, leading to product and price pressures. High-speed memory, crucial for AI, represents one of the earliest memory technologies swiftly depleting supply, consuming triple the wafer amount compared to standard DDR DRAM memory,” Arya explained.
Arya projects a 48% compounded annual growth rate for the high-bandwidth memory market, poised to exceed $20 billion by 2027.
“The memory sector is also poised to benefit as AI permeates higher-end devices like advanced phones, PCs, and other smart/connected products,” Arya added.
Bank of America has raised Micron’s price target to \(144 from \)120, reflecting a potential 15% upside.
3. AMD
Arya expresses confidence in AMD’s ability to secure a 5% to 10% share in the AI accelerator market dominated by Nvidia, owing to its consistent performance.
“While some enthusiasts suggest a 20% market share opportunity for AMD, we believe the company faces competition from multiple fronts – including leader NVDA with its established position/scale and competitively priced Blackwell products, custom chips offering cost-effective/highly optimized solutions, and numerous startups targeting niche markets,” Arya outlined.
Despite playing catch-up in the AI realm, AMD is expected to leverage its chiplet architecture for swift advancement to the 3nm node for AI products by CY26, as per Arya.
Bank of America has reiterated its $195 price target for AMD, signifying a potential profit increase of 7%.
