Bank of America has highlighted three analog semiconductor companies as preferred exposures to power-related content tied to artificial intelligence infrastructure and the industry shift toward higher-voltage data center designs.
In a research note by analyst Vivek Arya, the bank singled out Texas Instruments, Analog Devices and ON Semiconductor as top choices in the analog space. BofA raised price targets on two of the three companies discussed, and argued that both cyclical recovery and long-term structural trends are reshaping the growth outlook for the subsector.
Market backdrop and BofA view
Arya wrote that core industrial and automotive markets have "finally turned the corner, going from headwinds during the inventory correction to cyclical tailwinds," and added that transformative growth in AI data centers is redefining the long-term growth profile for the subsector. The note indicated that potential content gains associated with the move to 800-volt data center architecture may be underappreciated in current Street estimates.
Recent share performance
Despite notable rallies this quarter, BofA said upside tied to increased component content could still be larger than consensus models assume. Quarter-to-date performance cited in the note showed Texas Instruments up 59%, Analog Devices up 25% and ON Semiconductor up 88%.
Company-level detail
- Texas Instruments - BofA raised its price target to $370 from $320 and projects the company’s data center business could reach approximately $4.5 billion by 2028, representing as much as 18% of total sales as multi-phase voltage regulators and gallium nitride sockets come online with the 800-volt transition.
- Analog Devices - BofA estimates total AI exposure at about $2 billion annually, with AI sales excluding test and measurement equipment potentially hitting $3.3 billion by 2028. Arya noted that "The acquisition of Empower enhances ADI’s chances to win coveted vertical power delivery sockets LT, especially as the industry moves to integrated voltage regulators."
- ON Semiconductor - Described as "a potentially high leverage way to gain exposure to AI power," BofA projects AI-related sales for ON could expand more than sixfold to $1.6 billion by 2028 and raised its price objective to $138 from $115.
Implications
BofA’s note frames both cyclical demand recovery in industrial and automotive end markets and structural content gains in AI data centers as drivers that may alter the revenue mix for leading analog suppliers over the coming years. The firm signaled that current estimates on the Street might not fully reflect these dynamics.
Clear summary
Bank of America has identified Texas Instruments, Analog Devices and ON Semiconductor as top analog semiconductor picks, raised price targets on Texas Instruments and ON Semiconductor, and highlighted the potential for underappreciated content gains from the transition to 800-volt data center architecture and AI-driven power demand.
Key points
- BofA elevated price targets for Texas Instruments (to $370) and ON Semiconductor (to $138) while keeping Analog Devices as a top pick.
- The bank expects Texas Instruments’ data center business could reach about $4.5 billion by 2028 and ADI’s AI-related sales (excluding test and measurement) could reach $3.3 billion by 2028.
- Sectors impacted include semiconductors, data centers, and industrial and automotive end markets due to shifting component content and voltage architecture.
Risks and uncertainties
- It is uncertain whether Street estimates already incorporate the full extent of potential content gains tied to the 800-volt transition - market expectations may be misaligned.
- The anticipated shift to 800-volt data center architecture and related component adoption timelines could affect projected revenue outcomes for the semiconductor suppliers referenced.
- Cyclical strength in industrial and automotive markets is described as having "turned the corner," which implies exposure to potential reversion if those tailwinds change.