Bank of America analyst Vivek Arya has laid out a bullish long-term outlook for the semiconductor industry, projecting the total addressable market (TAM) to reach $3.2 trillion by 2030, up from an estimated $1.7 trillion this year. Despite recent volatility and concerns over an AI slowdown, Arya sees memory chips and data-center demand as key growth drivers, alongside recoveries in automotive and industrial sectors.
AI demand remains resilient
Investors have been worried that companies like Anthropic and OpenAI might cut hardware spending if they slow development of large language models. However, Arya sees "no signs of slowing" in customer orders, long-term agreements, supply commitments, and chip pricing. He notes that next year "remains much a fully booked/contracted year" for providers of computing power, networking components, and memory chips, and expects 2028 to "remain tight" as demand continues to absorb available capacity.
This suggests that any moderation in AI model development may not immediately translate into weaker semiconductor demand, given existing commitments for computing and infrastructure.
Chip stocks recover after sharp selloff
The semiconductor sector experienced a sharp selloff earlier this week after AI industry leaders warned about existential risks, causing the Philadelphia Semiconductor Index to drop more than 5%. Major chipmakers including Nvidia, AMD, and Micron fell sharply, along with equipment makers like Lam Research and Applied Materials. The sector partially recovered the next day, with the index closing 0.4% higher.
Arya expects the sector to remain "range-bound" in the near term, influenced by US midterm elections and macroeconomic conditions. He sees "greater resilience" from AI and analog chipmakers as well as networking companies.
Memory shortages to drive growth
Arya highlights memory demand as a major driver of long-term expansion. "Memory-chip shortages and price inflation remain a critical lever behind industry growth upside," he wrote. He also sees a "brighter outlook" for traditional and AI server manufacturers as computing infrastructure demand grows.
Once semiconductor momentum strengthens, Arya expects Micron's valuation, Intel, and equipment makers Lam Research and Applied Materials to lead the sector. The PHLX Semiconductor Index has already gained about 56% this year, yet Arya argues that semiconductor stocks remain relatively attractive compared with growth stocks more broadly. "Semis still screen attractively relative to growth," he said, noting they trade at a lower valuation than the S&P 500 despite stronger expected earnings growth.
Fab equipment market set for expansion
The bullish outlook extends to companies supplying semiconductor manufacturing equipment. Arya raised his expectations for the wafer-fabrication equipment TAM to $156 billion this year and $210 billion next year, reflecting growing demand for wafers used in logic and memory chips. By the end of the decade, he sees the wafer-fab equipment industry potentially reaching $360 billion in revenue, supported by new chip-manufacturing technologies and expanding clean-room capacity.
For investors, these projections point to a semiconductor industry whose growth could extend well beyond the current AI cycle. While the sector may remain volatile in the near term as markets digest questions over AI spending and macroeconomic risks, Arya's longer-term outlook rests on multiple sources of demand.
As AI slowdown fears hit chip stocks, spending plans appear intact, and the memory market's tightness could persist through 2028. For those watching memory stocks tumble amid AI safety debates, Arya's analysis offers a counterpoint: the underlying demand drivers remain strong.
This article is for informational purposes only and does not constitute financial advice.
