Top 20 Semiconductor Investments for Hyperscaler Custom Chips
If hyperscalers (e.g. Microsoft, Google, Amazon, Meta etc.) go all-in on custom chips for AI compute, which companies are the best investments?
In recent years, hyperscalers—massive cloud service providers like Amazon, Google, Microsoft, Meta—have ramped up custom chip development to optimize performance, efficiency, and scalability in data centers.
Engineering custom chips allows these companies to gain a competitive edge in processing speed, power consumption, and overall cost-efficacy relative to more generalized NVIDIA GPUs.
(Related: NVIDIA GPUs vs. Custom Chips: Who wins out by 2035?)
Since it’s possible we’ll see a massive increase in custom silicon within the next 5 years, I made 2 lists:
Most important companies for custom chips in semiconductor sector
Highest growth potential companies in the semiconductor sector over the next 5 years if custom chips boom
Why? To determine which companies have good ROI potential if there’s a massive boom in custom chips.
Keep in mind that while there’s no guarantee of a custom chip surge - you can always identify companies that should perform: (1) well without an uptick in custom chips and (2) even better if there’s a custom chip surge.
Top 20 Semiconductor Investments for Hyperscaler Custom Chips (Ranked by Importance)
We need to think logically and identify companies that are most important (i.e. critical) in the semiconductor sector and/or supply chain for hyperscalers looking to develop and manufacture custom chips.
For the rankings, I considered things like:
Role in custom chip development: The company's involvement in essential aspects of custom chip design, manufacturing, or support services.
Estimated % of revenue from custom chips: How much of the company’s revenue is derived from activities directly related to custom chip development. (For example, Samsung has a fairly small % of revenue from its foundry – whereas TSMC is foundry-centric with a large % of revenue from its foundry).
Overall magnitude of importance: Determine how important each company is for the hyperscalers making custom chips. Are there any companies that they need to make custom chips to their desired specs?
1. TSMC (Taiwan Semiconductor Manufacturing Co.)
Role: Advanced Node Semiconductor Foundry
Why It's Required: TSMC dominates cutting-edge fabrication processes (5nm, 3nm, and future nodes like 2nm). Most custom chip developers, including hyperscalers and industry players, depend on TSMC for high-performance production with unmatched yield and scale.
Estimated % Revenue (Custom Chips): Nearly 100%
Criticality Rating: 10/10
Notes: Without TSMC, advanced custom chip production would face significant bottlenecks globally.
2. ASML Holding NV
Role: EUV Lithography Equipment Supplier
Why It's Required: Sole provider of EUV lithography tools necessary for manufacturing semiconductors at advanced nodes. TSMC, Samsung, and Intel depend on ASML to produce custom chips.
Estimated % Revenue (Custom Chips): ~85%
Criticality Rating: 10/10
Notes: ASML is indispensable for scaling advanced semiconductor production. Any disruption in ASML's supply chain could severely impact custom chip manufacturing globally.
3. ARM Holdings (ARM)
Role: Processor Architecture IP Provider
Why It's Required: ARM designs are foundational to many custom chips due to their power efficiency and scalability. Its architectures are widely adopted by hyperscalers and industries for AI, edge, and embedded computing.
Estimated % Revenue (Custom Chips): Nearly 100%
Criticality Rating: 9.5/10
Notes: ARM’s dominance in architecture licensing ensures its pivotal role in enabling custom chip development.
4. Synopsys (SNPS)
Role: EDA Tools and Semiconductor IP Provider
Why It's Required: Synopsys provides essential tools for chip design, verification, and testing. Its IP cores simplify the development of custom chips, shortening time-to-market for chip developers.
Estimated % Revenue (Custom Chips): ~90%
Criticality Rating: 9.5/10
Notes: Synopsys is critical for efficient R&D in custom chip development, especially for complex designs.
5. Cadence Design Systems (CDNS)
Role: EDA Tools and IP Provider
Why It's Required: Cadence offers critical tools for designing and verifying custom chip architectures, complementing Synopsys.
Estimated % Revenue (Custom Chips): ~90%
Criticality Rating: 9.5/10
Notes: Its role is crucial for enabling advanced custom chips.
6. Applied Materials (AMAT)
Role: Semiconductor Manufacturing Equipment Supplier
Why It's Required: Supplies deposition, etching, and advanced packaging tools critical for fabricating custom chips.
Estimated % Revenue (Custom Chips): ~50%
Criticality Rating: 9/10
Notes: Its equipment is indispensable for scaling custom chip production.
7. Micron Technology (MU)
Role: Memory Solutions Provider (HBM and DRAM)
Why It's Required: Supplies high-bandwidth memory required for AI-focused custom chips in data centers and edge devices.
Estimated % Revenue (Custom Chips): ~20%
Criticality Rating: 8.5/10
Notes: Memory is critical for high-performance custom chips, making Micron essential.
8. Marvell Technology (MRVL)
Role: Networking and Storage Solutions Provider
Why It's Required: Supplies networking components and interconnect solutions crucial for integrating and operationalizing custom chips in data centers.
Estimated % Revenue (Custom Chips): ~75%
Criticality Rating: 8.5/10
Notes: Plays a key role in enabling custom chip deployment.
9. Broadcom (AVGO)
Role: Networking and Connectivity Solutions
Why It's Required: Supplies interconnect solutions critical for custom chip environments, including distributed AI workloads.
Estimated % Revenue (Custom Chips): ~30%
Criticality Rating: 8/10
Notes: Networking remains a vital component of custom chip infrastructure.
10. ASE Group (ASX)
Role: Advanced Packaging and Testing Services
Why It's Required: Specializes in chiplet packaging and 3D stacking, which enhance the performance and scalability of custom chips.
Estimated % Revenue (Custom Chips): ~80%
Criticality Rating: 8/10
Notes: Advanced packaging is increasingly critical for custom chips.
11. SK Hynix
Role: High-Bandwidth Memory Supplier
Why It's Required: Provides memory solutions essential for custom chips used in AI and data centers.
Estimated % Revenue (Custom Chips): ~25%
Criticality Rating: 7.5/10
Notes: Complements Micron in memory supply.
12. Intel Foundry Services (IFS)
Role: Semiconductor Foundry
Why It's Required: Expanding into advanced foundry services to offer alternatives to TSMC and Samsung.
Estimated % Revenue (Custom Chips): <5%
Criticality Rating: 7.5/10
Notes: Execution remains a challenge, but its potential is significant.
13. Lam Research (LRCX)
Role: Semiconductor Equipment Manufacturer
Why It's Required: Supplies tools required for etching and deposition in advanced semiconductor fabrication.
Estimated % Revenue (Custom Chips): ~60%
Criticality Rating: 7.5/10
Notes: Supports advanced manufacturing.
14. KLA Corporation (KLAC)
Role: Process Control and Yield Management Solutions
Why It's Required: Ensures yield and quality during custom chip production through inspection and metrology tools.
Estimated % Revenue (Custom Chips): ~70%
Criticality Rating: 7/10
Notes: Guarantees quality control for chip production.
15. Samsung Electronics (Samsung Foundry)
Role: Advanced Node Semiconductor Foundry
Why It's Required: Provides additional foundry capacity and diversification for custom chip production.
Estimated % Revenue (Custom Chips): ~15%
Criticality Rating: 7/10
Notes: Secondary to TSMC but still relevant.
16. GlobalFoundries (GFS)
Role: Specialty Semiconductor Foundry
Why It's Required: Focuses on mature nodes and specialty technologies, filling niches for custom chips.
Estimated % Revenue (Custom Chips): ~100%
Criticality Rating: 6.5/10
Notes: Key for non-advanced node applications.
17. Rambus Inc. (RMBS)
Role: High-Speed Interface and Memory Solutions Provider
Why It's Required: Rambus provides high-performance memory interfaces and interconnect solutions critical for custom chips used in AI, hyperscaler data centers, and high-throughput computing environments. These solutions ensure that custom chips can handle the increasing data transfer and memory bandwidth requirements efficiently.
Estimated % Revenue (Custom Chips): ~60%
Criticality Rating: 6.5/10
Notes: Rambus plays a key role in optimizing data throughput and memory integration for custom chips. As data-intensive applications continue to expand, its importance in maintaining system efficiency makes it indispensable, especially in hyperscaler deployments.
18. JCET Group
Role: Semiconductor Packaging and Testing Services
Why It's Required: Supports advanced packaging for custom chips with cost-effective solutions.
Estimated % Revenue (Custom Chips): ~85%
Criticality Rating: 6/10
Notes: Complementary to ASE Group.
19. Lattice Semiconductor (LSCC)
Role: Low-Power FPGA Provider
Why It's Required: Supplies FPGAs for energy-efficient custom chip use cases in edge and embedded systems.
Estimated % Revenue (Custom Chips): ~75%
Criticality Rating: 5.5/10
Notes: Focused on specific segments.
20. Analog Devices (ADI)
Role: High-Performance Analog and Mixed-Signal ICs Provider
Why It's Required: Supplies components that enhance power efficiency and data throughput in custom chip deployments.
Estimated % Revenue (Custom Chips): ~30%
Criticality Rating: 5.5/10
Notes: Indirectly important for optimizing performance.
Semiconductor Investments with the Highest Growth Potential Over the Next 5 Years in a “Custom Chip Boom”
The rankings of this second list focus strictly on direct beneficiaries of custom chip growth over the next 5 years assuming a surge in custom chips from the hyperscalers.
Top Picks: ARM, Synopsys, and Cadence lead the list due to their essential roles in enabling custom chip innovation, design, and architecture.
Supply Chain Leaders: Foundries such as TSMC, GlobalFoundries, and Samsung Foundry, along with equipment suppliers like ASML, Applied Materials, Lam Research - are critical to ensuring manufacturing scalability.
Memory & Packaging: Memory providers like Micron and SK Hynix, alongside advanced packaging leaders such as ASE and JCET, support the broader ecosystem with high-bandwidth solutions and innovative chip packaging technologies.
Emerging Opportunities: Companies like Marvell, Rambus, and Lattice Semiconductor address niche markets with networking, memory interfaces, and low-power solutions tailored for edge computing and AI.
Together, these players form the backbone of the custom chip market, positioning themselves for significant growth as hyperscalers drive adoption across AI, edge computing, and data center workloads.
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