AI Chips Drive Semiconductor Market Growth, But Traditional Segments Struggle

AI Chips Drive semiconductor industry is expected to grow by nearly 10% in 2025, mainly fueled by the rising demand for artificial intelligence (AI) and data center chips. However, traditional markets such as smartphones, personal computers, and automotive chips may experience slower growth due to pricing pressures and weaker consumer demand, according to ING analysts.

While the projected 9.5% growth is slightly lower than the 11.2% forecast from the World Semiconductor Trade Statistics (WSTS), it remains higher than the long-term industry growth rate anticipated by ASML.

AI Demand Reshapes the Market

AI technology continues to reshape the semiconductor industry, with companies investing heavily in AI-specific chips. NVIDIA remains a dominant force in the AI chip sector, although its most recent earnings report was met with a lukewarm response. Meanwhile, Samsung Electronics has revised its AI semiconductor outlook downward.

In contrast, AMD reported $5 billion in AI chip revenue for 2024 and expects strong double-digit growth in 2025. Taiwan Semiconductor Manufacturing Co. is even more optimistic about AI accelerators, predicting a mid-40% compound annual growth rate over the next five years—far surpassing its overall revenue growth projections.

Custom Chips Gain Popularity

One of the emerging trends in the semiconductor space is the growing shift toward custom application-specific integrated circuits (ASICs), particularly for data centers. This shift benefits companies like Broadcom and Marvell Technology, while increasing competition for industry giants such as Intel and AMD.

Memory and Logic Chips Show Long-Term Potential

Despite some near-term caution regarding memory chip prices, analysts remain optimistic about the long-term demand for high-bandwidth memory and advanced logic chips. These components are crucial for AI applications and high-performance computing, positioning the industry for sustained expansion in the coming years.

Overall, while some traditional semiconductor markets are facing challenges, AI-driven demand continues to push the industry forward, ensuring strong growth prospects for the foreseeable future.