ACL Digital
August 19, 2025
5 Minutes read
Why 2026 Will Be a Breakthrough Year for AI Chips and Semiconductors
Even though the demand in PC and mobile markets may be low, AI chip sales in 2026 are expected to reach great heights, primarily driven by data center expansions and the rapid rise in demand for generative AI. The semiconductor industry had a robust start and finish in 2024-2025, with noteworthy sales and growth of US$627 billion for the year. The AI chip and semiconductor industry is balanced for transformative growth, driven by increasing demand across data centers, edge devices, cloud computing, industrial automation, and automotive technologies. According to WSTS, the forecast for the global semiconductor market would be around US$800 billion in 2026, up from US$728 billion in 2025, indicating a steady momentum. Also, Deloitte and Next Move Strategy Consulting have highlighted that GPUs, NPUs, and AI-specific chipsets and accelerators represent a considerable portion of that value, with generative-AI chips alone forecasted above US$150 billion in 2025 and increasing in 2026.
While the semiconductor industry is cyclical by nature, some reports suggest that the semiconductor industry foresees demand to grow by 15% by 2026, while downstream organizations anticipate a growth of nearly 30%. Gen AI chip demand spanning GPUs, CPUs, memory, power chips, and data center has grown exponentially. However, Deloitte’s 2024 TMT Predictions report forecast of over $50B has proved to be moderate, as the market has likely hit $125B in 2024 (about 20% of all chip sales) and is expected to go past $150B in 2025.
Market Size & Growth Trends
- Global Semiconductor Expansion
- In 2024, global chip revenue reached US$626 billion, an 18% increase over 2023. TS2
- In 2025, revenue is projected at US$728 billion, and by 2026, forecast to hit US$800 billion, reflecting nearly 10% year-on-year growth. wsts
- Capital investments are robust—semiconductor firms allocated roughly US$185 billion in CAPEX in 2025, expanding manufacturing capacity by ~7%. infosys.com
- AI Chip Market Surge
- The AI chip sector was valued at US$52.9 billion in 2024, expected to escalate to US$295.6 billion by 2030, at a CAGR of 33%. Next Move Strategy Consulting
- Generative-AI specific chip sales already surpassed US$125 billion in 2024, with US$150 billion+ forecast for 2025, and climbing in 2026. Deloitte
- Alternative forecasts estimate AI chips for datacenter/cloud will exceed US$453 billion by 2030, with a CAGR around 14% from 2025. idtechex.com
Of late, rapid technological advancements are driving the demand for more efficient, powerful, and customized AI chips, driving semiconductor manufacturers to invest heavily in R&D. Nevertheless, some reports show that 58% of semiconductor companies consider that 5G, 6G, or other unique and contemporary communication guidelines are prompting their strategies. In comparison, 56% of the semiconductor manufacturers trust that Gen AI is influential. 5G and other futuristic communication protocols are the base and bridge to supporting numerous emerging technologies and markets, including AR/VR, edge computing, IoT, and autonomous vehicles. AI chips support the demand for next-gen semiconductor solutions that need performance, higher energy efficiency, and integration.
Demand for Specialized Semiconductors and GPU/NPUs
The adoption of AI and Gen AI is pushing the growing demand for GPU/NPU market, data centers, and advanced model training and inference capabilities. At the same time, the progress of on-device AI applications further emphasizes the need for dedicated semiconductor solutions.
The requirement for AI chips is on an unassailable rise, and companies are investing billions into research and production. The fast growth is powered by the adoption of advanced AI in finance, automotive, cloud computing, and healthcare.
Whether you’re an Indian large enterprise or a small startup in Europe, securing high-performance AI hardware will give you the superiority over your competitors. It simply means that now is a great time to invest in AI chips. Watch out for the leading players like AMD, Intel, and Nvidia, as well as emerging chip startups innovating in this space.
The Growth of Custom Silicon
As AI workloads increase, energy needs, infrastructure, and electricity suppliers must adjust quickly to sustain the growing demands of data centers. However, big companies such as NVIDIA, with their dominant market share in AI chips, persist in exerting considerable leverage over pricing. Custom silicon is driving the demand for high-energy efficiency, distinction, and optimized performance in top-performing markets such as high-tech, medical devices, and automotive, which propels the use of custom silicon. Typically, custom AI chips help organizations to meet exact application demands, leverage advances in AI and IoT, and reduce costs at scale in AI and IoT, triggering widespread adoption across industries. Also, according to some third-party research, most telecom and industrial equipment organizations depend on custom silicon chips. Most tech giants, such as Meta, Microsoft, and Amazon, are also developing custom-made chips for AI inference.
Key Benefits and Features of Custom AI Chips
What Are Custom AI Chips?
At times, Application-Specific Integrated Circuits (ASICs) are also mentioned as (ASICs) are custom AI chips intended to optimize AI workloads. These AI chips are personalized to boost performance for tasks such as NLP or image recognition. Tech giants like Apple (with its Neural Engine), Google (with its TPUs), and Tesla (with its FSD Chip) have heavily funded custom AI chips to improve the efficiency of their AI-driven products.
Business Benefits of Custom AI Chips
- Reduced latency
The chips are improved for accurate algorithms, enabling real-time processing and faster inference. - Less power consumption
These chips are a perfect match for edge computing and mobile applications, as they remove unwanted components. - Efficient performance
Custom AI chips are developed from the ground up for tasks, following exceptional performance and optimization compared to general-purpose hardware. - Scalability
For bigger semiconductor and chip manufacturing companies with regular and high-volume AI workloads, customized chips can be scaled to meet growing demands.
Limitations and Challenges
- Longer Development Time
This is unsuitable for companies with immediate needs, as the process of designing, testing, and optimizing custom chips can take many years. - High Development Costs
Major investment is involved in R&D for designing and fabricating custom AI chips, and it often requires substantial money, essentially in millions of dollars. - Minimal Flexibility
Tailored chips are highly specialized, meaning they may not be adjustable to new applications or AI models other than their intended use case.
Closing Notes
The AI chip industry is growing swiftly due to the rising demand for artificial intelligence across multiple industries. The need and urge for chips and robust processors is driving extraordinary innovation in the semiconductor industry. While semiconductor technology innovations support cutting-edge AI applications, from real-time language processing to autonomous systems.
Contemporary innovations and achievements in quantum computing, neuromorphic computing, and edge computing are unfurling new opportunities for artificial intelligence. These modern innovations are not just enhancing the capabilities of AI, but they are also creating unique possibilities in different fields, such as transportation, healthcare, life sciences, and smart infrastructure. It is intriguing to learn how technology is developing and changing our world.
From increasing costs to technical constraints to ethical considerations like workforce impact and data privacy, AI and semiconductor technological innovation may face multiple new challenges. However, navigating this unknown future demands responsibility and experience. ACL Digital would be your go-to partner for end-to-end custom AI-chipset and semiconductor solutions that spruce up innovation while addressing these challenges. Contact ACL Digital for more information.
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