The Conviction Gap: Bank of America Pulls 3 High-Fly AI Stocks Off Its Top List

Bank of America removed Nvidia Corp. (NASDAQ:NVDA), Micron Technology Inc. (NASDAQ:MU) and Lam Research Corp. (NASDAQ:LRCX) from its US 1 List on Nov. 10, but it kept Buy ratings on all three.

That may sound contradictory, but it comes down to how the bank classifies its recommendations.

A Buy rating just means the bank expects a positive total return. The US 1 List is different. It’s the short roster of ideas where analysts put their reputation on the line. Dropping a name tells you the near-term risk/reward looks less compelling, even if the long-term AI story still holds.

Cracks in the AI Thesis

Nvidia’s problem is mostly governance, not the business itself. The board is probing CEO Jensen Huang after Huang admitted an affair with a woman U.S. intelligence reportedly suspected of spying for China.

The stock sits about 28% below its Oct. 6 record close heading into Nov. 17 earnings. Wells Fargo analyst Aaron Rakers maintained an Overweight rating Tuesday but cut the price target from $315 to $300.

Micron’s tension is fundamental. Counterpoint Research says global DRAM revenue jumped 369% year over year in the third quarter, while bit shipments grew just 4% sequentially. Pricing is doing the heavy lifting.

Meanwhile, Yorkville Ives analyst Dan Ives now expects 10% fewer data centers in the analyst’s baseline forecast, with cuts possibly reaching 15% to 20%. Ives also sees Big Tech capex growth peaking in 2027. Micron shares plunged about 17% on Nov. 5 in the post-midterm chip selloff and, despite a modest recovery since, remain below their 20-, 50-, 100- and 200-day moving averages.

Lam actually delivered. First-quarter fiscal 2027 adjusted EPS of $2.20 beat the $2.18 estimate, revenue of $8.22 billion topped $8.15 billion, and the board approved a $25 billion buyback.

Yet analysts still trimmed targets on Oct. 22 after December-quarter guidance fell short of whispers: Needham to $290 from $390, Mizuho to $360 from $365 and Morgan Stanley to $339 from $385.

Your Chip ETF Isn’t as Diversified as You Think

The concentration risk is real for retail. In the VanEck Semiconductor ETF (NASDAQ:SMH), Nvidia is the largest holding at roughly 20.5% to 20.8%. Micron sits near 4.2% to 4.6% and Lam around 3.5% to 4.0%.

Together, that’s roughly 28% to 29% of the fund — more than a quarter tied to names that just lost BofA’s highest conviction.

The iShares Semiconductor ETF (NASDAQ:SOXX) is less concentrated but hardly immune. Nvidia weighs about 7.8%, Micron about 7.4% and Lam about 3.3%, for a combined 18.5%.

Those numbers matter for passive flows. If institutions rotate out of these three names for any length of time, fund outflows and price pressure could become notable in mainstream retail portfolios.

Price Action: Nvidia shares were down 4.05% at $171.43, Micron was down 1.12% at $724.97 and Lam Research was up 1.80% at $225.30 at the time of publication Tuesday, according to Benzinga Pro data.

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