Investing.com -- Bank of America analysts see the recent AI-driven selloff as “an enhanced Buy opportunity” for semiconductor stocks, reiterating their Buy ratings on NVIDIA (NASDAQ:NVDA), Broadcom (NASDAQ:AVGO), and Marvell (NASDAQ:MRVL).
In a note Wednesday, the bank argued that DeepSeek’s advances are “more evolutionary than revolutionary” and do not alter their forecast for a doubling of the total addressable market (TAM) for compute to over $500 billion between 2025 and 2029.
“DeepSeek’s contributions are noteworthy but part of the rapidly evolving generative AI industry rather than a big course correction,” BofA analysts wrote.
While DeepSeek’s optimizations could lower certain AI training costs, BofA says they are not proprietary and are already available to others.
Western AI capex, they note, remains driven by “artificial general intelligence (AGI), enterprise use-cases across a wide range of verticals, and over time by edge AI.”
BofA acknowledges that investors are questioning whether AI spending will shift more rapidly toward inference, but they argue that training will remain highly compute-intensive, particularly for new “test-time scaling” models like OpenAI’s o3, which prioritize reasoning and accuracy.
On the debate between custom ASICs and general-purpose GPUs, they see benefits for both but note that “while custom ASIC can provide cost efficiencies (AVGO/MRVL), we believe merchant GPU (NVDA) could prove more adaptable to rapidly changing compute and model mix.”
Drawing a historical parallel, BofA suggests that DeepSeek’s debut could trigger increased AI spending, similar to how the Soviet Union’s Sputnik launch in 1957 spurred the U.S. to establish NASA and massively boost space program funding.
“Hardware/semis remain an important piece (and perhaps the only differentiator) in advancing AI models,” they conclude, reinforcing their bullish stance on semiconductor leaders poised to benefit from accelerating AI investments.