Market research firm IDC's semiconductor industry report indicates that the demand for chips isn't going to dry up this year. The firm expects the semiconductor market to record 17.3% growth in 2021, up from the 10.8% increase it recorded last year. IDC points out that the semiconductor boom is being driven by smartphones, servers, notebooks, smart homes, gaming, wearables, and automotive, along with robust pricing for memory chips.

Qualcomm (QCOM 0.69%) and Advanced Micro Devices (AMD 0.33%) are two semiconductor stocks worth buying in the wake of the market's positive outlook. Each is well-positioned to take advantage of fast-growing semiconductor niches. Let's see why.

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1. Qualcomm

IDC estimates that the demand for smartphone semiconductors could increase 28.5% this year, driven mainly by the demand for 5G smartphones that are expected to witness a 128% increase in 2021. Qualcomm is one of the best ways to play this opportunity as it occupies nearly a quarter of the smartphone application processor market, according to Counterpoint Research.

The company's strong market share is translating into solid growth, as evident from its fiscal third-quarter results that were released in July. Qualcomm's revenue from handsets increased 57% year over year to $3.8 billion, accounting for nearly 48% of the top line. More importantly, the company looks all set to sustain this momentum thanks to the design wins it is clocking in the 5G smartphone space.

Qualcomm had recorded a 20% year-over-year increase in design wins for its flagship Snapdragon 888 processor. Additionally, the demand for its mid-range 7 series processors is also strong. The company pointed out that there were "nearly 40 new devices shipped or announced" last quarter based on the Snapdragon 7 series platform.

Qualcomm estimates that 450 million to 550 million 5G handsets could be sold in 2021. Credit Suisse estimates that 5G smartphone shipments could jump to 707 million units by next year, accounting for 50% of the overall market. So, 5G smartphones are set to enjoy multiyear growth. Qualcomm looks set to take advantage of the same as the company has struck over 150 5G license agreements that could ensure continued revenue growth in the long run through licensing fees.

Given such a massive tailwind, it is not surprising to see why analysts expect Qualcomm's earnings to increase at an annual pace of 32% for the next five years. And, as Qualcomm is trading at just 17 times trailing earnings, buying this semiconductor stock looks like a no-brainer considering the opportunities it is sitting on.

2. Advanced Micro Devices

IDC forecasts that the demand for gaming consoles is on track to increase 34% in 2021. AMD is one of the best ways to tap into this booming market as it supplies its chips to both Microsoft and Sony for their latest gaming consoles.

AMD is benefiting big-time from the gaming console market already, as evident from the acceleration in its enterprise, embedded, and semi-custom (EESC) business. The launch of the new gaming consoles last year has supercharged this business. The chipmaker's EESC revenue had surged a whopping 183% year over year in the second quarter of 2021 to $1.6 billion, outpacing its overall revenue growth of 99% by a handsome margin.

Investors can expect this terrific momentum to continue as the latest gaming console cycle is less than a year old, which means that there are millions of users still waiting to upgrade. Sony's PlayStation 5 was launched in November last year, and the company shipped 4.5 million units of the console in 2020. According to third-party estimates, Sony's PS5 sales are expected to take off and exceed 67 million in annual shipments by 2024.

Similarly, Microsoft's Xbox Series X sales are expected to hit an annual figure of 30 million units by 2023 as compared to an estimated 3.3 million units last year. So, AMD's semi-custom business seems built for long-term growth, especially considering that the company is on track to enter yet another lucrative niche in the gaming console space.

Throw in the tailwinds AMD is enjoying in other areas such as central processing units (CPUs), and it becomes easier to see why the chipmaker's earnings are expected to clock an annual growth rate of more than 30% for the next five years. All of this tells us why AMD is a top growth stock to buy right now, especially considering that its price-to-earnings ratio of 36 is much lower than the five-year average of 117. In all, AMD is an ideal bet for investors looking to get into a high-growth company taking advantage of key semiconductor trends at an attractive valuation.