Semiconductor Shutterstock

The US semiconductor industry has reached a monumental milestone, reaching a combined market capitalization of $5.5 trillion as of Thursday. This achievement hypothetically places the US chipmaker industry as the third largest economy in the world, surpassing Japan and trailing only the US and China.

The industry’s impressive growth is fueled by rising demand for artificial intelligence (AI) chips, which has more than tripled the overall market value over the past year alone.

Leading this rapid growth, Nvidia Corp. (NASDAQ:NVDA) commands more than half of the industry’s total market value, amounting to nearly $3 trillion.

Nvidia’s share price is up 210% over the past year and 143% year-to-date, marking the strongest performance within the broader tech-heavy Nasdaq 100 index. Nvidia’s revenue has grown at a compound annual growth rate of 54% over the past three years, reflecting its growth in the data center business.

In addition to Nvidia, 10 other U.S. semiconductor companies boast a market cap of more than $100 billion, solidifying the industry’s dominance. Six chipmakers also appear in the S&P 100, the most of any other industry. Broadcom Inc. ( NASDAQ:AVGO ), with a market cap of $650 billion, ranks as the second-largest chipmaker and the eighth-largest U.S. company overall.

15 Largest US Chip Makers by Market Capitalization

Name Market cap (USD bn)
NVIDIA Corporation $2,955.70
Broadcom Inc. $650.33
Advanced Micro Devices Inc. (NASDAQ: AMD ) $270.33
QUALCOMM Incorporated (NASDAQ: QCOM ) $235.75
Applied Materials, Inc. (NASDAQ:AMAT) $183.52
Texas instruments included. (NASDAQ:TXN) $177.92
Micron Technology, Inc. (NASDAQ:MU) $143.75
Intel Corporation (NASDAQ: INTC ) $129.66
Lam Research Corporation (NASDAQ:LRCX) $125.26
Analog Devices, Inc (NASDAQ:ADI) $117.53
KLA Corporation (NASDAQ:KLAC) $105.07
Marvell Technology, Inc. (NASDAQ:MRVL) $58.99
Microchip technology included (NASDAQ:MCHP) $50.01
Monolithic Power Systems, Inc. (NASDAQ:MPWR) $36.75
On Semiconductor Corp (NASDAQ: ON) $31.30

Also read: Jensen Huang’s Nvidia Will Be ‘Top Dog’ In AI Chip War, AMD Will Take A Piece, Tech Investor Paul Max Predicts

How High Can the US Semiconductor Rally Go?

US chipmaker exchange-traded funds (ETFs) are currently trading at record highs.

gave VanEck Semiconductor ETF (NYSE:SMH) and iShares Semiconductor ETF (NYSE:SOXX) has gained 75% and 51% over the past year, respectively. Nvidia’s large weighting in the SMH explains its outperformance compared to the SOXX ETF.

According to an equity analyst at Bank of America Vivek Arya, semiconductor stocks could face a pullback due to rising rates, the upcoming U.S. election, geopolitical tensions, unfavorable AI headlines, and mild weather. Despite these potential pitfalls, the investment bank remains bullish on chip stocks, focusing on three favorite themes in particular:

  1. the cloud (Top picks: NVDA and AVGO)
  2. Cars (Top pick: NXP Semiconductor NV)
  3. Complexity (Top Pick: KLA Corporation)

Understanding the Chip Cycle

According to Arya, semiconductor cycles typically span about 3.5 years, with 10 up quarters followed by 4-5 down quarters.

The current upcycle began in late 2023, placing us in the third quarter, which suggests continued strength through mid-2026.

However, semiconductor stocks tend to reverse direction 6-9 months ahead of cycle inflections, indicating that the semi-final is likely around the second half of 2025, or about a year from now. The analyst explained.

“Many high-tech and cloud companies are either lagging behind or still experimenting with training their large language models, where the parameter size can increase 10-100 times to include several trillion parameters,” Arya said. can reach.”

Transforming global data centers to accelerated computing may require $250-$500 billion annually, and we are only 20-30% into this transformation, which could take another 3-5 years.

Read now: Cathy Wood Remains Bullish on AI Investments Despite Nvidia Stock Adjustment

Photo: Shutterstock

Source link