Chasing the AI Gold Rush: Momentum Investing in High-Growth Semiconductor Firms

The semiconductor industry is experiencing a seismic shift, driven by the insatiable demand for artificial intelligence (AI) infrastructure. For momentum investors, this presents a compelling opportunity to capitalize on firms that are not only riding the AI wave but actively shaping it. The third quarter of 2025 has delivered a masterclass in this dynamic, with high-growth hardware and semiconductor companies posting earnings that defy macroeconomic headwinds.

Broadcom (AVGO) stands at the forefront of this transformation. Its Q3 FY2025 revenue surged to $15.8 billion, a 21% year-over-year increase, with its AI semiconductor segment alone generating $5.1 billion—up 60% YoY [1]. This performance is underpinned by a 70% market share in Ethernet switches for AI infrastructure and strategic partnerships with NVIDIA and AMD [1]. The company’s infrastructure software segment, bolstered by its VMware acquisition, added $6.7 billion in revenue, highlighting the power of recurring revenue models in software [1].

The broader industry is equally impressive. The semiconductor sector’s Q2 2025 revenue grew 11.16% year-on-year, with operating income rising 9.73% [4]. These gains are fueled by generative AI, which is projected to drive $150 billion in chip sales in 2025 [2]. While PC and mobile markets remain stagnant, data centers and AI-specific hardware are outpacing all expectations.

Other momentum leaders are following suit. Advanced Micro Devices (AMD) has gained 47% year-to-date, driven by its AI and server processor dominance [5]. KLA, Lam Research, and Micron Technology have also outperformed, rising 45%, 37%, and 33% respectively, as demand for advanced fabrication tools and memory chips accelerates [5]. These gains reflect a sector-wide shift toward capitalizing on AI’s infrastructure needs.

The investment thesis here is clear: companies with strong R&D pipelines and strategic acquisitions are best positioned to sustain growth. Broadcom’s $9.31 billion FY2024 R&D investment, for instance, has solidified its leadership in AI chip design and packaging technologies [1]. Similarly, its VMware acquisition has delivered $1 billion in annual cost synergies and 66% EBITDA margins [1], demonstrating the value of software integration in hardware-centric businesses.

For momentum investors, the key is to identify firms with both technical execution and market share dominance. The semiconductor industry’s projected $697 billion in 2025 sales [3] underscores the scale of opportunity, but not all players will benefit equally. Those with AI-specific expertise—like Broadcom, AMD, and NVIDIA—are likely to outperform as the sector consolidates.

**Source:[1] Broadcom's AI Networking Domination and Q3 Earnings Catalysts, Strategic & Financial Deep Dive, [https://www.ainvest.com/news/broadcom-ai-networking-domination-q3-earnings-catalysts-strategic-financial-deep-dive-2508/][2] 2025 global semiconductor industry outlook, [https://www.deloitte.com/us/en/insights/industry/technology/technology-media-telecom-outlooks/semiconductor-industry-outlook.html][3] 2025 global semiconductor industry outlook, [https://www.deloitte.com/us/en/insights/industry/technology/technology-media-telecom-outlooks/semiconductor-industry-outlook.html][4] Semiconductors Industry Growth Rates, [https://csimarket.com/Industry/industry_growth_rates.php?ind=1010][5] Stacked: The Best Performing Chip Stocks of 2025, [https://www.valuethemarkets.com/investing-data-story/stacked-best-performing-chip-stocks-of-2025]