According to Bank of America, ARM and Micron Technology (NASDAQ:MU) are poised to be significant beneficiaries as artificial intelligence (AI) capabilities expand to on-device applications in phones and PCs.
Bank of America analysts noted, "Edge AI is a nascent but important market," emphasizing the growing role of compute and memory chips in this domain.
The bank stated that while it's still early days with no must-have AI apps for phones and PCs, consumer hardware companies are leveraging rising consumer interest and a growing software ecosystem to drive faster upgrade cycles.
This trend mirrors the 4G/5G deployments where advanced hardware preceded the emergence of applications like Instagram and Uber (NYSE:UBER).
BofA explains that on-device AI offers numerous benefits, including faster performance, personalization, privacy, and the ability to offload AI inferencing costs and energy requirements to the device.
Microsoft (NASDAQ:MSFT) introduced a performance metric of 40 Trillion Operations Per Second (TOPS) for AI PCs, and Bank of America anticipates significant growth in the adoption of these high-performance PCs from 8 million units in 2024 to 155 million by 2028.
Smartphone AI adoption is still limited to less than 5% of the global deployed base, but Bank of America expects it to expand to around 50% in the next five years. They highlighted Apple (NASDAQ:AAPL)'s recently announced AI features, supported only on the iPhone 15 Pro models, as an example of this trend.
Bank of America raised its price target for ARM to $180, citing faster conversion to its v9 architecture and market share gains against Intel (NASDAQ:INTC) and AMD (NASDAQ:AMD). Similarly, the price target for Micron was raised to $170, driven by the expected increase in high-bandwidth memory share in the cloud and the growing DRAM requirements for AI PCs and smartphones.