Bank of America: These 6 global AI stocks are ‘hidden gems’ with great potential

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Bank of America has identified five global stocks it says are set to benefit as the use cases of artificial intelligence applications grow significantly. In an Oct. 3 note titled “End-device AI: Great potential with hidden gems awaits,” the bank said customized and private AI services could soon be brought directly to users’ end devices, revolutionizing smartphones, tablets, cars and more. This is different from today’s server-based systems like ChatGPT which rely on cloud computing. Bank of America analysts also likened what it calls “end-device AI” to J.A.R.V.I.S. , the AI assistant used by Iron Man. The analysts said AI computing cores will see massive growth as a result, estimating a 96% compounded annual growth rate for foundries and a 105% growth rate for chipmakers from 2023-2025, reaching over $14 billion in revenue. “We think it should lead to strong semiconductor (the enabler of AI) upgrade for end-devices, and likely ignite a substantial replacement cycle,” said BofA analysts led by Brad Lin in a note to clients. “We expect more generative AI-ready chip launches in late-2023 and new end-product announcements during CES and MWC in early 2024 to be key catalysts.” The report named semiconductor leaders like Qualcomm , MediaTek , Nordic Semiconductor, SK Hynix and Renesas as key potential beneficiaries. Qualcomm Price target: $145 (31% upside) Bank of America said automakers are expected to use advanced end-device AI capabilities from Qualcomm’s Ride platform for in-car services. It also notes the chip giant’s collaboration with Meta to bring AI to smartphones and PCs using Meta’s Llama 2 large language models directly on devices. MediaTek Price target: 1,100 New Taiwan dollars (40% upside) Bank of America expects the firm to add generative AI functions to its next flagship smartphone chips. It says MediaTek sees its AI processor size growing to handle these advanced capabilities. Nordic Semiconductor Price target: 125 Norwegian Kroner (16% upside) The chip maker is picked for its acquisition of Altazo, which included a hyper-low-power AI/ML processor tech for future system-on-chips. SK Hynix Price target: 160,000 Korean won (33% upside) Memory chipmaker SK Hynix already gets over 10% of sales from high-bandwidth memory used in AI. Bank of America said it expects rising customized services due to the growing AI application trend. Renesas Price target: 3,400 Yen (59% upside) The bank likes the Japanese semiconductor giant for its development of specialized inference chips and its aim to capture a bigger slice of the 200 billion yen (1.34 billion) AI market by 2026.