AI Procurement Outlook: A Record-Breaking Year for Semiconductors

The AI Procurement Outlook for 2024 reflects a booming semiconductor market driven by high demand for AI-optimized chips and a continued surge in average selling prices (ASPs). With the global market projected to hit nearly $680 billion by the year’s end, this growth trend is set to redefine the AI hardware landscape.

2024 Market Surge: Key Drivers and Trends

The semiconductor industry saw a remarkable 24% growth in the first half of 2024, and expectations for the second half are even higher, with a forecasted 29% increase. This extraordinary growth is largely propelled by the demand for high-performance AI chips, especially GPUs and high-bandwidth memory (HBM), which power complex AI models and tasks. This surge in AI-driven demand has led to a 17% increase in ASPs, bolstered further by reduced capital expenditures and strategic production cuts from industry leaders.

Inventory challenges, though still present, are slowly easing as demand rises and supply stabilizes. A significant contributor to this recovery is the growing popularity of edge AI devices, which are expected to play a major role in relieving inventory backlogs and sustaining ASP gains in the latter half of the year.

2025 Forecast: Record Sales and ASP Growth

TechInsights forecasts another robust year in 2025, with semiconductor sales projected to grow by 25%, pushing market value close to an unprecedented $850 billion. ASPs are also expected to continue rising, with a predicted 5% gain, as demand remains strong across data centers, consumer devices, and the expanding edge AI market.

Key factors expected to drive growth in 2025 include:

• Edge AI Expansion: Increased adoption of AI-powered devices across sectors will drive semiconductor demand.
• Device Replacement Cycles: Many devices bought during the COVID-19 era are due for upgrades, especially with the migration from Windows 10 to Windows 11.
• Broad-Based Market Recovery: Across segments, we anticipate a steady recovery as inventory levels normalize and pricing stabilizes.