AI drives 20% of global semiconductor market as demand surges: report

Morningstar noted inventory correction in industrial markets is “winding down."

Artificial intelligence is reshaping the semiconductor landscape faster than expected.

According to Morningstar’s latest Industry Pulse report for Q3 2025, AI accelerators accounted for roughly 20% of the total semiconductor market in 2024, and that share is rising in 2025.

The shift is being led by hyperscaler buildouts, with Nvidia at the center, AMD gaining share, and Broadcom benefiting from custom silicon demand.

Cloud providers such as Meta and Oracle are ramping up rack-scale deployments powered by next-gen chips like Nvidia’s Blackwell and Blackwell Ultra.

Morningstar noted that despite ongoing U.S. export controls limiting shipments to China, strong demand from the U.S. and other global markets continues to support growth.

The report painted a mixed picture across subsectors. The data center segment remains strong, thanks to AI workloads. PC demand is recovering, with AMD gaining high-end CPU share and Intel skewing toward lower-priced, non-AI chips.

In contrast, wireless demand remains muted, industrial is bottoming, and automotive is still in a cyclical downturn after post-pandemic overbuilds—though chip content per vehicle, especially in EVs, continues to rise.

AI’s impact is also evident in the memory space. High-bandwidth memory (HBM) surged to 20% of DRAM sales in 2024, up from just 6% a year earlier, driven by AI workloads. SK hynix and Micron lead the HBM market, whilst Samsung is looking to regain share through key product qualifications.

NAND flash pricing has started to recover following early-year oversupply, with improvements expected to continue into 2026.

The analog and mixed-signal segment—focused on industrial, automotive, and consumer applications—has lagged digital semis but appears to be stabilizing.

Morningstar noted inventory correction in industrial markets is “winding down,” and gross margins across the group bottomed around March 2025, with signs of recovery ahead.

Inventories at both chipmakers and distributors remain high but are trending downward, setting up a potential reversion heading into the next cycle. However, tariffs and broader geopolitical uncertainty remain key risks to timing.

Morningstar views the overall semiconductor sector as fairly valued as of late September, with the median stock trading near its fair value estimate. Digital names tied to AI trends have seen stronger price appreciation, whilst analog or mixed-signal stocks currently look cheaper.

Top stock picks from Morningstar include Infineon (IFX), NXP (NXPI), onsemi (ON), and Marvell (MRVL)—names that offer exposure to secular growth areas like AI, EVs, and industrial automation.