Q3 2025: Digital and Analog Semiconductor Industry Overview

Artificial intelligence (AI) continues to define this generation’s most transformative technology shift, and semiconductor companies are at the center of it. As of Sept. 22, the median semiconductor stock is fairly valued, while the median analog stock remains 11% undervalued. Digital semiconductor stocks also trade at a 3% discount. Earlier in the year, these companies staged a strong recovery from double-digit discounts following the “tariff tantrum.”

AI demand is fueling growth across both digital and analog semiconductor markets:

• AI accelerators now represent 20% of the semiconductor market, with Nvidia leading the way.
• Wide adoption of high-bandwidth memory (HBM) is reshaping the memory sector, meeting data center and AI demands head-on.
• Analog and industrial chip markets are recovering from a cyclical downturn, signaling growth opportunities ahead.
• Even with concerns around macroeconomics and tariffs, secular growth trends across automotive and industrial sectors remain strong.

Morningstar’s latest Digital and Analog Semiconductor Industry Pulse highlights the growing importance of AI accelerators and industrial chip demand, with Nvidia, Analog Devices, and other leading semiconductor manufacturers driving market innovation.

What is the difference between the types of semiconductors?

Digital semiconductors—including CPUs, GPUs, and microcontrollers—act as the brains of devices, managing processing and data computation. Memory chips, such as NAND and DRAM, store that information. Analog semiconductors, by contrast, convert and process real-world signals like temperature, sound, and voltage. Other categories, such as optoelectronics, discretes, and sensors, perform specialized tasks, such as emitting light or detecting motion.

Download the report now to learn more on key trends in this evolving industry and access detailed insights into how semiconductors are evolving across AI, memory, and analog chip markets.