Chip stocks soared Tuesday after Bank of America indicated that the artificial-intelligence boom remains fundamentally driven by earnings growth — not speculative and bubble-related excesses — despite one of the strongest rallies the sector has ever seen.
The iShares Semiconductor ETF (NASDAQ:SOXX) has surged roughly 80% year-to-date, making semiconductors one of the largest drivers of the S&P 500's gains this year.
Yet despite the historic rally, forward valuations across many leading AI chip stocks remain surprisingly reasonable.
"The move is earnings-led," Bank of America’s analyst Vivek Arya said, indicating that the SOX forward price-to-earnings multiple sits at roughly 25.6x — broadly unchanged from the start of the year and still below prior peaks near 30x.
Nvidia Looks Cheaper Than Before The Rally
One of the biggest surprises in the report is Nvidia Corp. (NASDAQ:NVDA).
Despite becoming the world's most valuable semiconductor company and adding trillions in market value during the AI boom, Nvidia's valuation has actually compressed.
BofA estimates Nvidia now trades at 17.5x 2027 earnings, nearly 48% below its own five-year average multiple of 33.6x.
At the same time, analysts expect Nvidia's earnings per share to compound at 62% annually between 2025 and 2027.
That leaves Nvidia with a PEG ratio — a metric comparing valuation to earnings growth — of just 0.28x, one of the lowest among major semiconductor stocks.
For context, a PEG ratio below 1x is often viewed on Wall Street as a sign that earnings growth is outpacing valuation expansion.
Micron May Be The Cheapest AI Stock In The Market
The most extreme valuation case in BofA's analysis is Micron Technology Inc. (NASDAQ:MU), which trades at just 6.9x 2027 earnings estimates. That’s about 31% below its historical average multiple.
Yet the company is projected to deliver 170% EPS growth and 100% sales growth between 2025 and 2027 as demand for high-bandwidth memory, or HBM, explodes alongside AI accelerator shipments.
That gives Micron an ultra-low PEG ratio of just 0.04x — effectively making it one of the cheapest large-cap AI trades in the entire market.
BofA forecasts the AI data-center market could expand from $264 billion in 2025 to roughly $1.7 trillion by 2030, with accelerators alone reaching a $1.2 trillion opportunity.
The firm also expects Micron’s HBM revenue to climb from $34.5 billion in 2025 to more than $168 billion by 2030.
| Company | PE 2026E | PE 2027E | Historical 5Y PE | CY27E PEG |
|---|---|---|---|---|
| Nvidia Corp. | 25.2x | 17.5x | 33.6x | 0.28x |
| Broadcom Inc. (NASDAQ:AVGO) | 32.8x | 21.7x | 20.5x | 0.34x |
| Advanced Micro Devices Inc. (NASDAQ:AMD) | 64.6x | 36.3x | 30.2x | 0.48x |
| Micron Technology Inc. | 8.8x | 6.9x | 10.1x | 0.04x |
| Intel Corp. (NASDAQ:INTC) | 108.3x | 76.7x | 24.9x | 0.83x |
| Arm Holdings Plc (NASDAQ:ARM) | 153.1x | 109.7x | 71.5x | 4.00x |
| Cadence Design Systems Inc. (NASDAQ:CDNS) | 47.0x | 39.9x | 42.0x | 2.75x |
| Synopsys Inc. (NASDAQ:SNPS) | 35.5x | 29.8x | 35.2x | 2.08x |
| Marvell Technology Inc. (NASDAQ:MRVL) | 53.0x | 37.1x | 28.3x | 0.98x |
| Astera Labs Inc. (NASDAQ:ALAB) | 102.3x | 74.1x | 73.2x | 1.48x |
| Credo Technology Group Holding Ltd. (NASDAQ:CRDO) | 49.5x | 35.0x | 65.1x | 0.55x |
| Coherent Corp. (NYSE:COHR) | 56.0x | 39.1x | 18.8x | 0.80x |
| Lumentum Holdings Inc. (NASDAQ:LITE) | 72.4x | 40.2x | 18.3x | 0.30x |
| Lattice Semiconductor Corp. (NASDAQ:LSCC) | 79.0x | 60.7x | 42.5x | 1.22x |
| Ambarella Inc. (NASDAQ:AMBA) | 123.9x | 88.3x | 96.5x | 3.25x |
Market Reaction
Micron Technology Inc. surged 18.1% by 10:40 a.m. ET, putting the stock on pace for its best single-day gain since April 2025. Shares are now up roughly 202% year-to-date.
The broader semiconductor complex rallied sharply as well, with the iShares Semiconductor ETF iShares Semiconductor ETF climbing 6.2%.
Among mega-cap chipmakers, Micron led gains, followed by Analog Devices Inc. (NASDAQ:ADI), up 6.2%, and Advanced Micro Devices Inc. , which gained 5.7%.
Other major winners included:
- Marvell Technology Inc. (NASDAQ:MRVL) +5.6%
- KLA Corp. (NASDAQ:KLAC) +5.5%
- Texas Instruments Inc. (NASDAQ:TXN) +5.4%
- Applied Materials Inc. (NASDAQ:AMAT) +5.3%
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