Bank of America analyst Vivek Arya upgraded the global semiconductor 2026 outlook to $1.3 trillion, citing AI and data center demand as the primary growth drivers. The firm projects a compound annual growth rate of 20%, with the market potentially reaching $2 trillion within four years.

Industry research indicates this would mark a third consecutive year of double-digit growth for semiconductor revenue, underscoring the critical role of chips in supporting AI applications and infrastructure. Sustained investments in compute, networking, and memory are fueling the expansion.

In his annual letter, Amazon CEO Andy Jassy revealed the company is developing its own AI chip to serve AWS customers, aiming to lower costs and improve cloud economics. This move positions Amazon as a direct competitor to established chipmakers by leveraging vertical integration.

Amazon’s entry into chip design highlights the risk that tech giants may internalize their hardware needs, potentially reducing purchases from Nvidia and AMD. As major platforms seek cost advantages, chipmakers face pressure to innovate or risk losing key customers.