Everyone’s obsessing over Nvidia and GPU stocks. Meanwhile, a different corner of the semiconductor world is staging a quiet breakout — and most investors aren’t paying attention.
Analog chips — the original semiconductor technology that converts real-world signals like temperature, pressure, and motion into digital data — are suddenly red-hot. Analog Devices (ADI) just posted Q1 revenue of $3.16 billion, beating estimates, with year-over-year growth of 30%. But here’s the kicker: its Q2 guidance of $3.5 billion (midpoint) crushed the $3.23 billion Wall Street was expecting. Adjusted EPS guidance of $2.88 blew past the $2.31 consensus by 25%. Shares jumped 8% on the news.
Why are analog chips suddenly booming? Because AI isn’t just a software story. Every data center that processes AI workloads needs physical infrastructure — power management, sensors, signal converters, optical networking components. That’s analog territory. And as hyperscalers like Microsoft, Google, and Amazon pour hundreds of billions into data center buildouts, the demand for these “boring” chips is surging alongside the flashy GPU orders.
What makes the analog story especially interesting is the timing. The analog chip cycle has been delayed relative to digital. While GPU makers like Nvidia saw their boom kick off in 2023, the analog industry went through a prolonged post-pandemic inventory correction. That correction appears to be over. ADI’s management called 2026 a “banner year” and is guiding toward record revenues, with operating margins heading north of 40% and a free cash flow target of 40% by fiscal 2027.
The broader analog chip market is roughly $85 billion — a fraction of the $750 billion total semiconductor market. But it’s a high-margin, sticky business. Companies like ADI, Texas Instruments, and Microchip Technology dominate their niches and tend to keep customers for decades. As AI spending cascades from GPUs into the physical infrastructure layer, analog chip makers are catching the second wave of demand that digital players already rode.
MarketWatch flagged six non-AI chip companies this week that could benefit from this exact trend — calling analog the “next leg of the AI boom.” The thesis is straightforward: AI data centers need power management, precision sensors, and analog-to-digital conversion at massive scale. The companies that make those chips are coming out of a cyclical downturn right into a secular tailwind. Investors who only own GPU stocks might be missing half the AI trade.