Bank of America is positive on Europe's chip stocks, and says two of its picks are set to benefit from a massive spending spree this year. In a research note to clients on Wednesday, BofA research analysts Didier Scemama and Adam Angelov said they "remain sanguine on EU Semis" which they said "look cheap." The analysts are particularly bullish on Dutch semiconductor equipment firms ASML and Besi , as well as French-Italian chipmaker STMicro . "EU semis on average have seen a sharp de-rating, with most stocks in our coverage now trading in-line to slightly below their 5-year median, in spite of higher margins, higher returns and more generous cash returns to shareholders," the analysts wrote. ASML and Besi are among the companies that are well placed to benefit from the huge spending spree that TSMC , the world's largest chipmaker, is embarking on this year. The Taiwanese firm, which sells its advanced chips to the likes of Apple and Nvidia , is set to spend $40-44 billion in 2022 to expand its capacity and address the global chip shortage . Valued at around $270 billion, ASML sells some of its most advanced lithography machines to TSMC, while Besi provides it with packaging equipment. Meanwhile, Apple supplier STMicro said Thursday that it plans to double its investments to up to $3.6 billion this year after strong demand drove its earnings to beat expectations in the fourth quarter. Some analysts believe that STMicro's exposure to Apple is a cause for concern but BofA believes the risk is already factored into the company's share price. "We think that concerns over the size of its Apple exposure and related loss of a major contract are baked in at the current price," the analysts wrote. "Yet we estimate that the company will outgrow its peers in terms of both sales and EBITDA over the next two years."
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Bank of America is positive on Europe's chip stocks, and says two of its picks are set to benefit from a massive spending spree this year.