Bank of America elevated Micron Technology as its preferred semiconductor play, arguing that memory chips—now roughly 35% to 40% of cloud AI spending—are undervalued despite their growing importance. The brokerage issued a Buy rating on Micron while downgrading Qualcomm, citing the shift toward longer-term supply agreements and more stable pricing as a factor that could support higher valuations in the memory sector over time.
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Bank of America gave Micron Technology a Buy rating and $1,550 price target, saying memory chipmakers offer a stronger investment case than Qualcomm as artificial intelligence reshapes semiconductors. The brokerage cited memory now representing roughly 35% to 40% of cloud AI capital spending, well above historical levels.
Why it matters
Memory stocks trade at modest valuations despite this spending shift, reflecting investor concerns about pricing and customer concentration. Bank of America argues the market may be underestimating a shift toward longer-term supply agreements and more stable pricing—a transition that could support higher valuation multiples over time.
What to watch
Bank of America maintained an Underperform rating on Qualcomm, citing uncertainty around whether its custom silicon efforts will succeed and the impact of China business and future patent licensing deals with Apple.
Memory semiconductors have become a larger fraction of cloud infrastructure budgets than ever before, yet equity investors have been slow to recognize their value. Bank of America attributes this valuation lag to persistent doubts about pricing power, the risk of excess capacity, and reliance on a small number of major customers—all legitimate concerns that have kept memory stocks trading at relatively modest levels. The brokerage's thesis rests on a structural shift in the industry: a move toward longer-term supply contracts and more stable pricing. If that transition materializes, it would reduce the cyclicality and uncertainty that have historically pressured valuations in this segment.
Qualcomm, by contrast, faces multiple uncertainties that weigh on its investment case. Beyond the general slowdown in smartphone demand, the firm is betting on custom silicon efforts whose success is unproven, while also facing headwinds from China exposure and pending patent licensing negotiations with Apple. Bank of America's decision to maintain an Underperform rating on Qualcomm while upgrading its confidence in Micron signals a preference for a steady, structural shift over a turnaround dependent on multiple uncertain bets.
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