Bank of America believes compute-focused chipmakers present attractive valuations, despite ongoing artificial intelligence investments. Analyst Vivek Arya identified several key names in the sector, suggesting their sales and earnings growth potential is not reflected in current trading multiples. This comes as cloud providers are expected to continue investing heavily in compute infrastructure to support their AI ambitions.

BofA's preferred compute stocks, including Applied Materials, are projected to experience substantial sales and earnings growth between 2025 and 2027. Yet, these companies trade at relatively low price-to-earnings ratios, indicating a compelling valuation compared to other areas of the chip market. This is particularly relevant as AI becomes more integrated into business operations.

The firm anticipates cloud spending to continue its momentum, with significant year-over-year growth in cloud capex expected in 2026. BofA expects the anticipation of cloud AI earnings and Nvidia's GTC show to energize the group. Investors should watch for further developments in cloud spending and AI-related announcements from major tech companies.

Ultimately, the report suggests a positive outlook for companies providing the essential infrastructure for AI development. This is driven by the increasing demand for computing power. The semiconductor industry is expected to continue evolving as companies compete to provide the most efficient and powerful solutions.