Bank of America Analyst Names Nvidia, AMD and Broadcom as Undervalued Compute Stocks

TLDR

• Bank of America identified Nvidia, Broadcom, AMD, and Credo as attractive compute chip stocks with valuations below historical levels
• These four stocks are projected to grow sales by 42% and adjusted earnings by 49% from 2025 to 2027
• The stocks trade at 24 times 2027 earnings or just 0.5 times PEG ratio
• BofA’s cloud spending tracker suggests 38% year-over-year growth in 2026, potentially reaching 50% by year-end
• Large cloud providers continue to invest heavily in computing infrastructure, supporting double-digit revenue growth

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Bank of America flagged four compute-focused chipmakers as investment opportunities despite the ongoing artificial intelligence boom. Analyst Vivek Arya identified Nvidia, Broadcom, AMD, and Credo Technology Group as stocks trading below their historical valuations.

NVIDIA Corporation, NVDA

The bank released its analysis on Monday, describing the semiconductor sector as mixed. Some chip stocks appear overvalued while compute-related companies offer better value propositions.

The four recommended stocks are expected to deliver strong financial performance over the next two years. BofA projects average sales growth of 42% and adjusted earnings growth of 49% between 2025 and 2027.

Despite these growth projections, the stocks trade at 24 times 2027 earnings. This translates to just 0.5 times their price-to-earnings growth ratio.

Arya characterized this pricing as compelling compared to other semiconductor stocks. The valuation gap exists even as artificial intelligence investment continues to accelerate across the industry.

Cloud Infrastructure Investment Drives Growth

Large cloud providers view computing infrastructure investment as essential to their operations. BofA expects this spending to support double-digit sales growth for the recommended chip companies.

The bank’s cloud spending tracker shows strong momentum heading into 2026. Data suggests cloud capital expenditure could increase 38% year over year in 2026.

BofA believes this growth rate could accelerate as the year progresses. The firm sees potential for cloud spending growth to approach 50% by the end of 2026.

Despite rising investment levels, the bank expects aggregate free cash flow to remain positive. This suggests cloud providers can maintain their spending pace without financial strain.

Nvidia Conference Expected to Boost Sector

BofA anticipates renewed investor interest in compute stocks during the first quarter. The bank expects cloud AI earnings reports to provide positive catalysts for the sector.

Nvidia’s GTC conference scheduled for March 16-19 represents another key event. Arya believes anticipation around this conference will help reenergize the compute chip group.

The bank maintains that compute-focused chipmakers offer better value than other semiconductor categories. Current valuations remain depressed relative to expected growth rates through 2027.

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