AI Semiconductor Market

AI (artificial intelligence) is widely cited as a growth driver for the technology industry, including semiconductors. While AI is in its early stages, opinions vary on whether it will become common in the next few years. A McKinsey study from May 2024 showed 72% of organizations have adopted AI in at least one business function. These organizations saw the risks in AI as inaccuracy (63%), intellectual property infringement (52%) and cybersecurity (51%).

In the U.S., may consumers have concerns about AI. A Pew Research Center survey in 2023 revealed that the majority of people were more concerned than excited about AI (52%), 36% were equally excited and concerned, and only 10% were more excited than concerned. 60% of respondents were uncomfortable with the use of AI in healthcare. An AAA survey in March 2024 showed 66% of people in the U.S. were afraid of self-driving cars while only 9% would trust them.

Nevertheless, AI is here to stay and will have a major effect on the global economy in the near future. AI will have a significant impact on the semiconductor industry. A Gartner report from May 2024 estimated worldwide

AI IC revenue at $54 billion in 2023, $71 billion in 2024 and $92 billion on 2025. Forecasts of the compound annual growth rate (CAGR) of AI ICs over the next several years range from 20% (MarketsandMarkets) to 41% (DataHorizzon Research).

The AI IC market has undergone explosive growth in the last few years. NVIDIA is the dominant AI IC company. The revenue of its Data Center division, which includes most of NVIDIA’s AI, more than tripled from $15 billion in fiscal year 2023 (calendar year 2022) to $48 billion in fiscal 2024 (calendar 2023). It will likely double in fiscal 2025 (calendar 2024) to over $100 billion. We estimate NVIDIA’s AI IC revenue will be about $96 billion, most of the revenue from its Data Center division. NVIDIA’s latest AI graphics processor will sell for between $30,000 and $40,000 according to CEO Jensen Huang.

NVIDIA’s AI revenue includes its AI processors as well as memory included on the circuit board. SK Hynix has been NVIDIAs primary supplier of high bandwidth memory (HDM) used for AI. Micron Technology and Samsung are also HDM suppliers. The memory cost for NVIDIA will amount to several billion dollars in 2024.

AMD, the next largest supplier, projects $4.5 billion in AI IC revenue in 2024. Intel expects $500 million in AI IC revenue in 2024. AIMultiple Research lists eighteen additional companies which have announced AI ICs. These include cloud service providers (AWS, Alphabet, IBM and Alibaba), mobile AI IC providers (Apple, Huawei, MediaTek, Qualcomm and Samsung) and startups (SambaNova Systems, Cerebras Systems, Graphcore, Grog and Mythic).

We at Semiconductor Intelligence estimate the global AI IC market in 2024 at $110 billion. NVIDIA dominates with $96 billion in revenue and 87% market share. AMD is $4.5 billion, and Intel is $0.5 billion. Apple is estimated at $3 billion based on the AI processors in its iPhone 16 models. Samsung’s AI-enabled Galaxy S24 should generate about $1 billion in AI IC revenue for its primary supplier, Qualcomm. Other companies are just getting started in the market and are estimated at a total of $5 billion.

The $110 billion AI IC market in 2024 will account for 18% of the total semiconductor market based on the WSTS June 2024 forecast. Using a relatively conservative projection of a 20% CAGR for AI ICs over the next five years results in a $273 billion market in 2029. We project the long-term growth rate of the semiconductor market at a 7% CAGR, reaching $856 billion in 2029. AI ICs would then account for 31.9% of the total semiconductor market. AI ICs will not be totally additive to the semiconductor market. AI ICs will replace many of the current processors used in data centers, PCs, smartphones and automobiles.

Semiconductor Intelligence is a consulting firm providing market analysis, market insights and company analysis for anyone involved in the semiconductor industry – manufacturers, designers, foundries, suppliers, users or investors. Please contact me if you would like further information.

Bill Jewell
Semiconductor Intelligence, LLC
billjewell@sc-iq.com

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