Here are Bank of America's top chip stock picks for the second half

Published Thu, Jul 9 202010:37 AM EDTUpdated Thu, Jul 9 202010:50 AM EDT

(This story is for CNBC Pro subscribers only.) Bank of America is bullish on chip stocks in the second half of 2020. The Wall Street firm says a group of semiconductor names have secular tailwinds, including artificial intelligence, 5G, cloud and gaming. Plus, the chip stocks have strong balance sheets and solid free cash flow generation. Bank of America expects the group — which already has strong year-to-date performances — to continue its run-up. "Until we see firm signs of economic reopening/vaccines and/or higher treasury yields, growth could continue to outperform," Bank of America research analyst Vivek Arya told clients. "The Darwinian nature of technology suggests only companies that grow can reinvest and strengthen their competitive moats, while central bank liquidity (and lack of cyclical recovery) continues to support higher valuations," Arya added. Nvidia is one of Bank of America's top picks in the chip space. The firm has the highest price target on Wall Street at $460 per share. That implies a more than 10% increase from Nvidia's current share price of $408.64. Nvidia's price target reflects the stock's "superior long-term growth profile in large, underpenetrated markets," said Arya. Marvell Technology and Lam Research are also among the top chip picks for the firm. Bank of America said Marvell could experience nearly 30% long-term compounded annual earnings growth, "driven by potential success in 5G over the next few years." The firm has a $45 per share target price on Marvell. Lam Research could get a boost from "stronger-than-expected electronics demand that would tighten up semiconductor capacity, driving increased semiconductor equipment sales and/or increasing market share," Arya said. Skyworks Solutions is unique in the chip space due to its unlevered balance sheet and free cash flow generation, Bank of America said. The firm also expects Skyworks to get a boost from the upcoming 5G cycle. Inphi — with a $70 per share price target from Bank of America — trades at a peer premium but the firm said it is justified given Inphi's long-term earnings growth rate. Bank of America also added that Intel , Broadcom and Advanced Micro Devices have potential for earnings beats in the third quarter thanks to sustained cloud demand. The firm also reiterated its buy ratings on Microchip Technology and Cirrus Logic . — With reporting from CNBC's Michael Bloom.

A worker holding a wafer at Advanced Micro Devices

Norbert Millauer | AFP | Getty Images

(This story is for CNBC Pro subscribers only.)

Bank of America is bullish on chip stocks in the second half of 2020.

The Wall Street firm says a group of semiconductor names have secular tailwinds, including artificial intelligence, 5G, cloud and gaming. Plus, the chip stocks have strong balance sheets and solid free cash flow generation. Bank of America expects the group — which already has strong year-to-date performances — to continue its run-up.

"Until we see firm signs of economic reopening/vaccines and/or higher treasury yields, growth could continue to outperform," Bank of America research analyst Vivek Arya told clients.

"The Darwinian nature of technology suggests only companies that grow can reinvest and strengthen their competitive moats, while central bank liquidity (and lack of cyclical recovery) continues to support higher valuations," Arya added.