The 2026 AI Semiconductor and Utility Infrastructure Investment Playbook

The AI revolution is accelerating, and with it, the demand for cutting-edge semiconductors and robust energy infrastructure. As enterprises, hyperscalers, and governments pour capital into AI-driven systems, the semiconductor and utility sectors are poised for sustained growth. Bank of America's latest research identifies a clear path for investors to capitalize on this transformation, spotlighting high-conviction stocks in both AI chipmaking and power enablers. This analysis evaluates the firm's top picks, including Nvidia, Broadcom, Lam Research, and utility leaders like Public Service Enterprise Group (PSEG) and Sempra, to assess their potential in a world where AI infrastructure spending is structural.

Semiconductors: The Engine of AI Innovation

At the heart of the AI boom lies the semiconductor industry, where companies like Nvidia (NVDA) and Broadcom (AVGO) are leading the charge. Bank of America has reaffirmed Nvidia as its top semiconductor pick for 2026, citing its dominance in AI accelerators and the impending launch of its Blackwell GPU generation. According to the firm, Blackwell is expected to deliver 10x–15x performance improvements over its predecessor, cementing Nvidia's leadership in powering next-generation large language models (LLMs).

Nvidia's recent financial results underscore its strength. For Q4 2025, the company reported revenue of $39.3 billion, a 78% year-over-year increase, driven by record data center sales of $35.6 billion. According to the company, strategic partnerships with cloud giants like AWS, Microsoft, and Google Cloud further solidify its position, as these platforms deploy Nvidia's GB200 systems globally to meet surging AI demand. Bank of America analysts project a 56% upside for Nvidia, with a price target reflecting its valuation premium and growth trajectory according to market analysis.

Broadcom (AVGO) is another key player, highlighted for its custom AI silicon and robust financials. The company recently raised its dividend by 10% and forecasts AI chip sales to double in the current quarter compared to 2024, reaching $8.2 billion. Bank of America notes Broadcom's exposure to enterprise and hyperscale clients, along with its leadership in networking solutions, as catalysts for continued growth according to analyst reports.

Lam Research (LRCX), a leader in wafer fabrication equipment, also features prominently in Bank of America's semiconductor playbook. The firm cites Lam's strong financials and critical role in advanced packaging technologies, which are essential for AI chip manufacturing. With wafer fab utilization rates rising nearly double-digit year-over-year, Lam is positioned to benefit from the extended semiconductor cycle.

Utilities: Powering the AI Infrastructure Boom

As AI systems proliferate, so does their energy demand. Data centers, the backbone of AI operations, require vast amounts of reliable power, creating a tailwind for utility companies. Bank of America's top utility picks-Public Service Enterprise Group (PSEG), Sempra (SRE), Alliant Energy (LNT), Southwest Gas (SWX), and Xcel Energy (XEL)-are strategically positioned to capitalize on this trend.

Public Service Enterprise Group (PSEG) stands out for its hybrid model, combining regulated utility stability with power generation assets. The company's Q3 2025 results showed non-GAAP operating earnings of $1.13 per share, with guidance narrowed to $4.00–$4.06 per share for 2025. According to the company, PSEG's service areas, including New Jersey and New York, are hubs for data center activity, and its $95 price target reflects its potential to deliver consistent returns.

Sempra (SRE) is another standout, with operations in AI-driven data center hotspots like California and Texas. The company has raised its capital investment plans by 30% for 2026–2029 to meet rising electricity demand, and Goldman Sachs recently upgraded its stock to Buy with a $106 price target. Sempra's Q3 2025 results, which included $1.11 in earnings per share and $3.15 billion in revenue, highlight its operational strength. According to market reports, the company is well-positioned to meet growing demand.

Alliant Energy (LNT) and Xcel Energy (XEL) are also well-positioned. Alliant Energy has secured 3 gigawatts of contracted demand from data centers, with peak energy needs projected to grow 50% by 2030. Xcel Energy, meanwhile, has boosted its five-year capital expenditure plan to $60 billion, focusing on transmission, distribution, and renewable energy to support AI infrastructure.

The Road Ahead: Structural Growth and Risks

While the outlook for AI semiconductors and utilities is bullish, investors must remain mindful of near-term risks. Short-term volatility in semiconductor demand and regulatory shifts in energy markets could create headwinds. However, Bank of America emphasizes that the long-term fundamentals-tight supply, enterprise adoption, and AI's structural role in the global economy-remain intact.

For semiconductors, the firm forecasts 30% growth in 2026, with AI-related spending driving nearly $1 trillion in semiconductor sales by 2030. According to industry analysis. In utilities, the rising power demands of data centers are expected to deliver 6–8%+ growth for companies like PSEG and Sempra through 2030. According to market reports.

Conclusion

The 2026 AI investment playbook is clear: prioritize semiconductor leaders like Nvidia and Broadcom, who are at the forefront of AI innovation, and utility enablers such as PSEG and Sempra, who are powering the infrastructure revolution. As AI spending becomes a permanent fixture of the global economy, these stocks offer a compelling mix of growth and resilience. For investors seeking to align with the next industrial revolution, the time to act is now.