2025 Global Semiconductor Industry Outlook

Daniel Nenni · Monday at 4:01 PM

Chip sales are set to soar in 2025, led by generative AI and data center build-outs, even as demand from PC and mobile markets may remain muted

The semiconductor industry had a robust 2024, with expected double-digit (19%) growth, and sales of US$627 billion for the year.1 But that’s even better than the earlier forecast of US$611 billion.2 And 2025 could be even better, with predicted sales of US$697 billion,3 reaching a new all-time high, and well on track to reach the widely accepted aspirational goal of US$1 trillion in chip sales by 2030. This suggests the industry only needs to grow at a compound annual growth rate of 7.5% between 2025 and 2030 (figure 1).4 Assuming the industry continues to grow at that rate, it could reach US$2 trillion in 2040.

The stock market is often a leading indicator of industry performance: As of mid-December 2024, the combined market capitalization of the top 10 global chip companies was US$6.5 trillion—up 93% from US$3.4 trillion in mid-December 2023 and 235% higher than the US$1.9 trillion seen in mid-November 2022.5 That said, it is worth noting that “average” chip stock performance in the last two years has been a “tale of two markets”: Companies involved in the generative AI chip market outperformed that average, while companies without that exposure (automotive, computer, smartphone, and communications semiconductor companies, for example) underperformed.6

One driver of industry sales has been the demand for gen AI chips: a mix of CPUs, GPUs, data center communications chips, memory, power chips, and more. Deloitte’s 2024 TMT Predictions report predicted that those gen AI chips collectively would be worth “more than” US$50 billion,7 which was a much too conservative forecast, as the market was likely worth over US$125 billion in 2024—and represented over 20% of total chip sales for the year.8 At the time of publication, we predict that gen AI chips will be over US$150 billion in 2025.9 Further, Lisa Su, chief executive officer at AMD, moved her estimate for the total addressable market for AI accelerator chips up to US$500 billion in 2028—a number larger than sales for the entire chip industry in 2023.10

Signposts for the future

For 2025, semiconductor industry executives should be mindful of the following signposts:

1) There is currently a mismatch between very high spending on semiconductors for gen AI, and companies being able to monetize their gen AI offerings. For 2025, the argument of “the risk of underinvesting is greater than the risk of overinvesting” seems to be still dominant, but if that attitude shifts, demand for gen AI chips could become weaker than predicted.
2) Competition from agile chip startups could intensify, challenging incumbents in the broader semiconductor industry. Notably, AI chip startups secured a cumulative US$7.6 billion in venture capital funding globally during the second, third, and last quarter of 2024,76 and several of these startups offer specialized solutions including customizable RISC-V-based applications, chiplets, LLM inference chips, photonic ICs, chip design, and chip equipment.
3) With interest rates in the United States and other major markets likely to drop further,77 a favorable credit environment could act as a tailwind for the chip industry’s M&A scene, which has already seen an uptick in 2024.78 Moreover, with two different chip markets evolving—one for AI chips and one for all other types of chips—the industry may experience M&A and consolidation, especially if companies with valuable IP lag their peers and are seen as attractive targets. Nonetheless, potential tighter regulations and trade conflicts, globally, could potentially dampen the deal environment.
4) As geopolitical challenges ripple across the globe, chip companies should brace themselves for further disruptions. Traditional channel partner models and allyships could get upended, even as reshoring, friendshoring, and nearshoring have gained momentum. Prolonging regional conflicts and wars could further impact the flow of vital materials and inventories. All of these could disrupt semi companies’ demand planning, requiring them to be more agile and adapt supply chain and sourcing contracts, and pricing terms.
5) A significant part of capex spending and revenues was driven by AI and the advanced wafers needed to produce those highly advanced AI chips. However, wafer demand from auto, industrial, and consumer segments continue to be lackluster, while there’s some uptick in demand from mobile handset and other consumer products. Through 2025 and 2026, though overall revenue and capex seem to continue trending upward (at least for the next nine to 12 months), any downward movement in AI-related spending and components shortage could have an adverse impact ripping through the broader global semiconductor and electronics supply chain.