Semiconductors Historic Start to 2026

The global semiconductor market grew 25% in the 1st quarter of 2026 from the 4th quarter of 2025 to reach $299 billion, according to WSTS. The 1st quarter of 2026 was up 79% from a year earlier. The 25% quarter-to-quarter growth was the highest in the over 40-year history of WSTS data, surpassing the 20% growth in the 2nd quarter of 2009. The 79% growth versus a year earlier was also a WSTS record, beating the previous record of 60% year-to-year growth in 1st quarter 2010.

The strong 1st quarter 2026 increase from the 4th quarter of 2025 was driven by AI. Nvidia, the dominant leader in AI processors, grew 20%. The five major memory companies (Samsung, SK Hynix, Micron Technology, Kioxia, and Sandisk) all cited AI as the growth driver in their spectacular quarter-to-quarter growth rates, ranging from 57% at SK Hynix to 97% at Sandisk. The combined revenues of Nvidia and the memory companies increased 49%. In the 1st quarter of 2026, the revenues of Nvidia and the memory companies totaled $208 billion, accounting for 70% of the revenues of the top twenty companies. The other companies in the top twenty saw revenue growth of only one percent. Eight of these other companies had declines, ranging from -0.2% at AMD to -14% at Qualcomm.

The dominance of the AI-related companies is reflected in the outlook for 2nd quarter of 2026 revenue change from the 1st quarter of 2026. Nvidia expects 12% growth. The memory companies which provided revenue guidance show robust growth expectations: Micron Technology 40%, Kioxia 75% and Sandisk 34%. Samsung Semiconductor and SK Hynix did not provide revenue guidance, but both expect strong AI memory demand to continue. Both Micron and Kioxia cited increasing memory prices as a major contributor to revenue increases. The combined revenues of Nvidia and the memory companies will likely experience revenue growth of over 30% in the 2nd quarter of 2026 from the 1st quarter.

The 2nd quarter 2026 outlook for the other companies is much less optimistic. Of the eleven companies providing guidance, two expect revenue to decline versus 1st quarter. Qualcomm’s guidance is for 9.7% decline and MediaTek’s guidance is for a 3.0% decline. Both companies cite weakening smartphone sales due to shortages of memory. Of the nine companies guiding revenue growth, most cite AI-driven data center demand as a key driver. The combined revenue expectations for these eleven companies amount to four percent increase in the 2nd quarter of 2026 from the 1st quarter.

The dominance of AI has led to a shortage of semiconductors for other applications. Two key historical drivers of semiconductor demand, PCs and smartphones, should decline in 2026. IDC’s latest forecast is a 12.9% drop in smartphone unit shipments and an 11.3% drop in PC unit shipments in 2026. These will be some of the steepest ever declines in these devices, but for the first time will be due to a supply shortage rather than a demand shortage.

The powerful start of the semiconductor market in 2026 should lead to historic growth for the full year. Recent forecasts range from 52.8% from IDC to our 80% at Semiconductor Intelligence. Gartner, Omdia, and the Cowan LRA model are in a narrow range of 62% to 65%. In the over forty-year history of WSTS, the largest market increase was 42% in 1995 in the beginning years of the internet boom. Earlier estimates of the semiconductor market have not shown growth rates this high since the early years of the semiconductor industry in the 1950s.

This AI-driven market is different from most previous semiconductor market booms. The idea is that AI applications will grow rapidly and require huge growth in AI data centers. There is not a direct connection between the end user and semiconductor market as there was in the PC boom and the smartphone boom. The closest equivalent to the AI boom is the dot-com boom in 1990s. The brisk growth of the internet required a huge increase in communications infrastructure which in turn drove semiconductor demand. The collapse of the dot-com boom in 2000 revealed the size of communications infrastructure exceeded the requirements to support the internet. The dot-com bust did not significantly impact the growth of internet users and applications. Similarly, AI can continue to flourish even if there is a correction in the growth of AI data centers. The next few years will certainly be interesting times for the semiconductor industry.

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