The Analog Advantage: Unheralded Chip Makers Poised to Power AI Boom

The recent surge in artificial intelligence (AI) infrastructure has sent shockwaves through the tech industry, but amidst all the chatter about memory giants and data center dominance, a quieter corner of the market is gaining traction. Amidst this AI boom, analog chipmakers – those behind-the-scenes power management specialists – are finally getting their due.

According to Bank of America analyst Vivek Arya, AI’s insatiable appetite for power requires more than just memory; it demands efficient power management systems that can handle massive amounts of data flow. Analog chipmakers manage the complex task of powering AI infrastructure, from servers to supercomputers, and are poised to capitalize on growing demand.

The market is expected to see a significant increase in demand for analog semiconductors this year alone, with growth projected at 50% to over 100%. This surge will benefit companies like Analog Devices (ADI), ON Semiconductor (ON), Texas Instruments (TXN), and Allegro MicroSystems (ALGM). Each of these companies has its own strengths: ADI’s dominance in industrial markets; ON’s exposure to the auto sector; TXN’s capacity utilization; and ALGM’s growth prospects tied to AI-related power needs.

Analog semiconductors have a broader range of applications than memory chips, which are often tied to consumer electronics and data storage. This versatility makes them essential components in factory automation, aerospace, defense, and power infrastructure. In fact, their unique combination of defensive industrial exposure, long product cycles, strong free cash flow generation, and participation in secular themes driving broader semiconductor spending make them attractive investments.

Bank of America is optimistic about the second half of 2026, with industrial demand improving and customers restocking analog hardware. As Arya notes, Analog Devices is well-positioned to lead the pack, with a price target of $460 representing an additional 19% upside over the next year. ON Semiconductor could see further gains as the auto market improves, while Texas Instruments is expected to benefit from higher chip demand and capacity utilization.

These companies have already demonstrated impressive resilience in the face of industry headwinds. Allegro MicroSystems, for instance, has climbed over 90% year to date – a testament to its growth prospects tied to AI-related power needs. As the market continues to evolve, it’s essential to keep an eye on these under-the-radar players.

Their contributions to the AI infrastructure boom are undeniable, and with demand expected to surge in the coming months, investors would do well to take a closer look at these analog chipmakers. The stage is set for a strong second half of 2026 – one that will undoubtedly bring its share of winners and losers. For those willing to venture off the beaten path, the analog advantage could prove a lucrative bet indeed.