Key Points
- Smaller tech firms are grabbing a $300 billion slice of the AI market.
- Credo and Astera Labs provide essential cables for connecting AI chips.
- MKS and Advanced Energy supply the power systems needed to build semiconductors.
- Teradyne tests high-end AI components to ensure they work before shipping.
While giants like Nvidia and Broadcom get all the glory, a group of smaller companies is quietly getting rich from the AI spending spree. Bank of America analyst Vivek Arya recently highlighted several “unsung heroes” in the semiconductor world. These smaller players, including Credo, MKS, and Teradyne, may not have Nvidia’s massive profit margins, but they provide the essential components that keep AI data centers running.
The money involved in this industry is massive. Experts predict that the market for AI data center systems will grow to over $1.2 trillion by 2030. While Nvidia’s famous chips take the biggest piece of that pie—about $900 billion—there is still a $300 billion slice left for everything else. This includes specialized cables, networking equipment, and complex power systems.
For example, Arya pointed to Credo. They manufacture specialized electrical cables that enable powerful GPUs to communicate with each other. In a massive AI cluster, these cables are critical for speed and energy efficiency. Another company, Astera Labs, focused on high-speed connectivity years before AI became a buzzword. Now, they are among the few people selling the exact technology needed to connect the latest hardware.
Other companies handle the “heavy lifting” of chip making. MKS Instruments and Advanced Energy provide the high-precision power and vacuum systems required to fabricate chips. Once the chips are finished, Teradyne uses automated machines to test them. This ensures these expensive parts actually work before they ship to customers.
However, there is a catch for these smaller firms. Unlike Nvidia, which can sell a single chip for $30,000, these companies face intense competition and falling prices.
As technology becomes more common, the price of cables and connectors typically declines rapidly. Their profit margins sit around 35% to 40%. That is a healthy number, but it is nothing compared to Nvidia’s incredible 70% margins. Even so, these companies are in a great position. They invested in niche technologies when no one else did, and now they are reaping the rewards of the AI boom.
