The AI gold rush is accelerating so quickly that even bullish analysts are struggling to keep up with their forecasts.

In a new note to clients, Bank of America analyst Vivek Arya issued a massive upgrade to the firm's global semiconductor outlook. He hiked its 2026 revenue target to $1.3 trillion โ€” a $300 billion leap from the estimate the bank provided just four months ago. Nvidia (NVDA) and Broadcom (AVGO) continue to power those AI ambitions, per Arya.

"We continue to view AI/data center to drive the majority of gains (via compute, networking, memory), with industrial contributing to growths on inventory replenishment and robotics ramp," Arya said.

The bank expects the total semiconductor market to hit the $2 trillion milestone by 2030. This implies a 20% compound annual growth rate (CAGR) through the end of the decade, more than double the 9% growth rate the industry averaged over the past 10 years.

To reach that finish line, Arya argued that the industry is entering a period of "leading logic intensity," where the complexity of chip designs requires a ramp-up in specialized tools.

For investors looking to ride this momentum, BofA is doubling down on "AI compute" leaders, including Marvell Technology (MRVL) and Advanced Micro Devices (AMD). Beyond the chips themselves, the firm is flagging opportunities in chipmaking equipment through names like Applied Materials (AMAT) and Lam Research (LRCX).

Arya also pointed to a looming rebound for electronic design automation (EDA) software firms like Cadence (CDNS) and Synopsys (SNPS). As the broader sector stabilizes, these names serve as a "picks and shovels" play for the design phase of the AI boom.

However, the report also revealed cracks in the broader hardware market. While AI is booming, traditional consumer sectors like smartphones and PCs continue to be a significant drag on the industry. Arya warned that consumer demand could remain sluggish into 2027, which will continue to weigh on the outlook for players like Qualcomm (QCOM) and Skyworks (SWKS).

This bifurcated outlook suggests that while the headline number is growing, the gains are increasingly becoming concentrated in a handful of high-priced players.

The disparity is striking. BofA models a 43% year-over-year jump in compute and storage, compared to a 9% decline in wireless communications.

There is also a mounting mathematical challenge to these aggressive chip forecasts. BofA's analysis suggests that for chip vendors to hit their 2027 sales targets, global cloud capital expenditure would need to exceed $1 trillion โ€” significantly higher than the current consensus of $872 billion. Such growth is not impossible โ€” the firm notes that capex from large private programs like Stargate, sovereign funds, and enterprises could pick up pace this year.

Still, this puts immense pressure on tech giants like Microsoft (MSFT) and Google (GOOG) to keep their foot on the gas, regardless of whether they're seeing tangible return on their gigantic AI investments. If the hyperscalers find themselves with excess capacity or if the monetization of AI software lags, the heightened expectations for chip players may be more hype than reality.

Francisco Velasquez is a Reporter at Yahoo Finance. Follow him on LinkedIn and X. Story tips? Reach him via email at francisco.velasquez@yahooinc.com.

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