Bank of America analysts warn the Philadelphia Semiconductor Index (SOX) could face approximately 10% downside risk, while simultaneously raising their total addressable market (TAM) forecast for AI data centers to $2.2 trillion by 2030.

Bank of America analyst Vivek Arya noted that despite fundamentals suggesting otherwise, the Philadelphia Semiconductor Index (SOX) could face a further downside risk of approximately 10%. Reasons cited include rising interest rates, stalled data center projects, geopolitical tensions, and investors' overexposure to chip stocks (overweight by about 13% relative to the S&P 500). However, the bank simultaneously raised its forecast for the total addressable market (TAM) for AI data centers in 2030 to $2.2 trillion, up from $1.7 trillion in May and an earlier forecast of $1.4 trillion, with AI accelerators expected to account for $1.2 trillion. Bank of America believes that if the market pulls back, NVIDIA, Marvell, Micron, Lam Research, AMD, Intel, Analog Devices, and onsemi present enhanced buying opportunities worth watching, with Micron and Lam Research being its top long-term picks. The bank also expressed concerns about NVIDIA's "cyclical financing arrangements" and suggested it increase the proportion of cash returned to shareholders.