While players like Nvidia ( NVDA ) and Broadcom ( AVGO ) are at the forefront of investors’ minds, smaller niche players are grabbing a slice of AI spending behind the scenes.
In a recent report, Bank of America analyst Vivek Arya named a handful of small-to-mid-cap companies as the unsung heroes of semiconductor growth.
“We mentioned some companies on the small-cap side, Credo, MKS, Advanced Energy, MACOM, and Teradyne,” Arya told reporters on December 19.
While these companies lack Nvidia’s huge margins, Arya suggests that they currently benefit from being the primary provider of needed technologies.
The amount of lost opportunity is staggering. BofA estimates that the total addressable market for AI data center systems will exceed $1.2 trillion by 2030, growing at a 38% compound annual growth rate. Within that, AI accelerators will take about $900 billion, but that leaves a larger $300 billion chunk — which depends on secondary technologies like networking, cables and power systems.
Arya breaks down how the pie is divided. For every $100 spent on AI hardware, $15 to $20 goes into networking. The third flows directly to the interconnect — the wiring and optical components that let GPUs talk to each other. As AI clusters expand, these bits and bolts of the trillion-dollar build-out are seeing direct benefits.
Arya highlights Credo (CRDO) for its leadership in active electrical wiring. As data centers prioritize “performance per watt”, Credo’s niche technology is critical. “They want to make sure that all these GPUs talk to each other very efficiently,” he said.
He also pointed to Astera Labs ( ALAB ) and its strong high-speed connectivity efforts through PCIe 6.0, the standard for moving data between a computer’s motherboard and its hardware.
“They invested in special technologies … nobody cared about these classes,” he said. “So now, they’re benefiting from being the only person standing in those specific niche technologies.”
Other major players like MKS Instruments ( MKSI ) and Advanced Energy ( AEIS ) provide the precise power and vacuum systems needed to actually manufacture the chips. If Nvidia is the architect, these companies provide the machinery and high-voltage power to run the site.
Meanwhile, MACOM ( MTSI ) provides the high-speed analog and optical components that allow these “brains” to interact, while Teradyne ( TER ) acts as the final checkpoint. The company’s automated testing equipment ensures these expensive components actually work before shipping.
