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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.