Nvidia Corp. has a lot of coverage in the semiconductor manufacturing area, which is fair. But over the next two years, a lot of other chip makers should also have very good years.
The market for graphics processing units used by data centres to help their corporate clients create artificial intelligence technology is led by Nvidia NVDA 1.53%. In each of the last five fiscal quarters, the company’s sales have grown by huge amounts.
The market value of Nvidia has grown from $358 billion to $2.61 trillion in just two years. There are now 5.7% of the SPDR S&P 500 ETF Trust SPY 0.44% made up of the company’s stock. This is the oldest and biggest exchange-traded fund that tracks the S&P 500 SPX 0.45%. The index gives more weight to Apple Inc. (AAPL -0.36%) and Microsoft Corp. (MSFT 2.09%).
This year, Nvidia is likely to beat last year’s sales by more than twice as much. It’s not likely that the company will be able to keep up that fast rate of growth in the future, but it should still be one of the fastest growing companies in its field.
On average, analysts think that Nvidia’s sales will grow at a rate of 33% per year until 2026. Some investors are worried about Nvidia’s growth potential for 2026, especially since the company’s latest quarter’s sales beat wasn’t as big as expected and there are questions about the return on investment for AI spending. Big cloud users and other people who have invested in AI may be less likely to do so if they don’t see enough return on their money.
Looking at semiconductor stocks
When a company basically makes a big, profitable new market, you can bet that the other companies will step up and finally take a piece of it. Or, in the case of Nvidia, GPU implementation might take a break while companies that spend a lot of money on new hardware feel pressured to make money from AI-related goods and services.
Now is a good time to think about what’s coming next. To do this, we can figure out the expected compound growth rates for the next two years of revenue for companies in the semiconductor business.
The iShares Semiconductor ETF SOXX 1.05%, which tracks the PHLX Semiconductor Index SOX 1.19%, was the first thing we looked at for this screen. After that, we added the 31 extra companies in the S&P 1500 Composite Index SP1500 0.40% that are in the semiconductor industry (FactSet) or in the Semiconductors and Semiconductor Equipment Global Industry Classification Standard group (Companies’ SEC filings). It is made up of the S&P 500 Index SPX0.45%, the S&P MidCap 400 Index MID -0.18%, and the S&P Small Cap 600 Index SML -0.30%.
Then, we looked at projections for calendar-year sales through 2026 from analysts surveyed by FactSet to find the companies that are likely to have the best two-year sales CAGR. As changed by FactSet, we used estimates for calendar years. This is because many companies confuse investors with fiscal years that don’t fit the calendar. In this case, Nvidia reported its findings for the second quarter of its fiscal year 2025 on August 28.
There were 61 companies in our first group that made or designed semiconductors and related equipment. For 53 of those companies, consensus sales projections were available through calendar year 2026.
Of the 53 companies that are still in business, 17 are projected to see their sales grow at a rate of more than 20% per year from calendar year 2024 to calendar year 2026. Sales projections for the calendar year are given in millions.
