AI Stocks Could Stay ’The Place to Be’ Next Year. Here Are Two Banks’ Top Chip Picks

Wall Street's latest love affair? It's not crypto—it's silicon. While digital assets get the headlines, the real money is chasing the picks and shovels of the AI gold rush.

The New Power Grid

Forget software. The foundational layer of artificial intelligence is hardware. The chips that train large language models and power data centers have become the most coveted assets in tech—creating a supply crunch that makes last cycle's GPU shortage look quaint.

Banking on Brains

Two major financial institutions just named their top semiconductor plays for the coming year. Their selections aren't speculative moonshots, but established giants positioned to profit regardless of which AI application wins. It's a classic Wall Street move: betting on the casino, not the gambler.

The Cynical Take

Here's the finance jab: When banks publish 'top picks,' remember they've usually already bought the position. The research note is just marketing for their inventory. The AI narrative is powerful, but never confuse an investment thesis with a sales pitch.

The chipmakers building AI's physical brain may offer something rare in tech: actual dividends alongside exponential growth. In a market obsessed with the next shiny thing, sometimes the smartest play is the one that's already printed on the motherboard.

Key Takeaways

• Analysts at Bank of America and Jefferies said they’re still bullish on semiconductor stocks heading into 2026. 
• AI stocks have pulled back lately amid worries about an AI bubble, but the analysts said semiconductor shares are likely to keep benefiting from spending on data centers.

AI stocks have had a tough time lately. Some analysts say they're sticking by their favorite chip stocks anyway.

AI is "still the place to be" heading into 2026, with chip stocks among the best ways to play the AI boom, Bank of America analysts told clients in a note last week, anticipating growing sales as cloud-computing giants continue to buy up hardware to build out data centers.

While shares of many of the bank's top large-cap picks for 2026 have taken hits in recent weeks during a broader pullback in tech, they remain leaders in a space that has already seen substantial gains this year, far outperforming the S&P 500. Many of them also overlap with semiconductor stocks highlighted by Jefferies analysts, who said they're "sticking with AI into 2026."

Why This Is Significant

Worries about an AI bubble have weighed on the tech sector in recent weeks, though some stocks have fared better than others. Jefferies and Bank of America suggested they see some of this year's biggest beneficiaries still being winners next year.

While shares of AI chip leader Nvidia (NVDA) have slipped over 12% from their October highs, they're still up more than 30% this year through Friday's close, as demand for its most advanced chips sent sales to new records.

Bank of America analysts said they see Nvidia's torrid growth continuing next year, pointing to a strong pipeline of new products. They called Nvidia a top large-cap pick for 2026, along with custom AI chipmaker Broadcom (AVGO), Lam Research (LRCX), KLA (KLAC), Analog Devices (ADI), and Cadence Design Systems (CDNS).

Jefferies also highlighted Nvidia, Broadcom, Lam Research, and KLA in a note last week, along with semiconductor manufacturing equipment company Applied Materials (AMAT) and inspection equipment provider Camtek (CAMT).

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Jefferies said Broadcom remains its top AI pick after replacing Nvidia earlier this year. "We haven’t given up on [Nvidia] given the technology moat and valuation," Jefferies said, but suggested Broadcom could have more room to rise based on expected growth in its custom chip business.

Jefferies said longtime Broadcom customer Google's recent decision to sell its custom chips to third parties such as Meta (META) and Anthropic could represent a "greenfield opportunity" for Broadcom, along with a growing number of custom chip customers that could include Apple (AAPL).

Shares of Broadcom have added close to half their value in 2025 through Friday's close just above $340, with Jefferies' Street-high target of $600 suggesting over 75% upside.