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AI Drives Strong Semiconductor Market in 2025-2026

AI Drives Strong Semiconductor Market in 2025-2026
by Bill Jewell on 02-26-2026 at 1:00 pm

Key takeaways

The global semiconductor market in 2025 was $792 billion, according to WSTS. 2025 was up 25.6% from 2024, the strongest growth since 26.2% in the COVID recovery year 2021. The increase was driven by AI, with Nvidia revenues up 65%. The major memory companies (Samsung, SK Hynix, Micron Technology, Kioxia and Sandisk) all cited AI as the primary revenue driver in their collective 29% revenue growth.

Fourth quarter 2025 results were mixed. The memory companies reported revenue growth in the range of 21% to 34% versus 3Q 2025. Nvidia was up 20%. Ten companies had 4Q 2025 revenue up in the range of 0.2% to 11%. Four companies (Texas Instruments, Infineon, Sony Imaging and Onsemi) reported revenue declines.

Top Semiconductor Revenue 2026

Guidance for 1Q 2026 revenue change from 4Q 2025 is mixed. The three memory companies providing guidance are expecting substantial revenue increases in 1Q 2026 with Micron at 37%, Sandisk at 52%, and Kioxia at 64%. Nvidia projects AI will drive 14% revenue growth. Four companies project revenue gains ranging from 2% to 11% based on a recovering industrial market and continuing AI strength. AMD, NXP Semiconductors, STMicroelectronics and Onsemi project revenue declines primarily due to seasonality.

The huge memory demand in AI is causing shortages of memory for other applications. Intel expects an 11% decline in revenue in 1Q 2026 versus 4Q 2025 due to shortages of memory for PCs. Qualcomm and MediaTek both cite memory shortages for smartphones as the reason for projected revenue declines.

In December, IDC cited the memory shortage as potentially leading to declining shipments of smartphones and PCs in 2026.

IDC Memory Shortage 2026

Thus, if strong AI growth continues in 2026, semiconductor companies dependent on the smartphone and PC markets could see revenues decline in 2026.

A year ago, no one predicted demand for AI would drive 25.6% growth in the semiconductor market in 2025. We at Semiconductor Intelligence give a virtual award for the most accurate semiconductor market forecast for the year. The criteria are publicly available forecasts released between October of the previous year and release of the WSTS January data in early March. The winner for 2025 is IDC which predicted 15% growth. Several other prognosticators were in the 12% to 14% range.

Looking ahead to 2026, recent forecasts are in two groups. In the lower group, the Cowan LRA model (based on historical revenue trends) has 9.5%. Future Horizons projected 12%. The higher group includes RCD Advisors at 23%, WSTS at 26.3%, and Semiconductor Intelligence at 30%.

2026 Market Forecast

We at Semiconductor Intelligence believe the robust expansion of AI will continue through at least the first half of 2026. The high quarter-to-quarter semiconductor market growth of 16% in 3Q 2025 and 14% in 4Q 2025 followed by an expected strong 1Q 2026 practically guarantees 2026 growth over 20%. Even if memory shortages impact the smartphone and PC markets, the booming AI market and the relative stability of the industrial and automotive markets will continue to drive semiconductor growth in 2026.

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

Also Read:

AI Bubble?

Semiconductors Up Over 20% in 2025

U.S. Electronics Production Growing

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