When people talk about the AI race, the names are Nvidia, OpenAI, Google and Microsoft. Almost nobody mentions Migdal HaEmek or Rehovot. Yet this week showed again how closely those two towns, and a few other points on Israel's map, are tied to that race. Nova of Rehovot reported record quarterly revenue of $287.8 million. Camtek of Migdal HaEmek reported $161.3 million, also a record. Tower, whose original fab is in the same Migdal HaEmek, reported $526 million earlier this week, another record.
The three companies do different things, but all are part of the same chain. To understand why they are growing so fast, you need to understand something basic about how chips are made, and what has changed in the past two years.
What metrology actually is
A modern chip is one of the most complex products humans make. Hundreds of chips are built on a plate-sized silicon wafer in a process with hundreds of steps: depositing layers, etching, polishing, and again. Each step must be accurate to a few nanometers, thousandths of the width of a hair. A small error at one step can turn a wafer worth tens of thousands of dollars into scrap.
That is where companies like Nova and Camtek come in. Nova builds systems that measure, during production, the thickness, shape and composition of the layers on the wafer, so the fab can correct deviations before they become problems. Camtek specializes in inspection: systems that look for defects, mainly in the advanced stages, when chips are being packaged and connected to each other. Consumers never see these products, but a modern fab cannot run without them.
Israel is especially strong in this field, and not only because of Nova and Camtek. American giants such as Applied Materials and KLA also run large inspection and metrology development centers in Israel, and many of their technologies were developed here. The field, which combines optics, physics, software and image processing, fits skills Israel has built up over decades.
Why now
AI changed the game in two ways. The first is volume: the giants are building data centers at an unprecedented pace, and each needs tens of thousands of advanced chips. Chipmakers from TSMC in Taiwan to Samsung and SK Hynix in Korea are investing enormous sums in new production lines, and every line needs metrology and inspection equipment.
The second is even more important, and concerns the type of chip. AI chips like Nvidia's need huge amounts of fast memory, so they are paired with HBM, in which several memory dies are stacked like floors in a building. The chips themselves are no longer made as a single unit but as several components joined inside one 'package'. This field, advanced packaging, has become one of the AI industry's main bottlenecks.
That is where the Israeli companies' advantage lies. The more complex the chip's structure, with more layers, more connections and more components, the more measurement and inspection it needs. Nova said this week its advanced packaging revenue hit a record on HBM and advanced logic expansions. Camtek says it has booked more than $800 million in orders this year, mainly for systems that inspect AI chips and HBM.
Tower and light
Tower is a slightly different story. It does not make equipment but chips, as a foundry manufacturing to order for other companies. One of its fastest-growing areas is silicon photonics: chips that move data using light instead of electricity. In huge data centers, where thousands of chips must talk to each other at enormous speed, optical links are becoming a necessity, because electricity over copper is not fast enough and wastes too much energy.
According to Tower's management, its annualized silicon photonics revenue run rate is expected to exceed $1.1 billion in the fourth quarter. The company expects about $600 million in revenue next quarter, and CEO Russell Ellwanger said it is entering the strongest growth phase in its history. Earlier this week it also said it will add about 150 employees in Israel.
The numbers behind the records
The numbers are worth a moment, because they tell a story. Nova's revenue grew 28% in a year, and it expects to pass $300 million for the first time in the fourth quarter. Camtek also grew 28% and expects more than $800 million in 2027, growth of over 35%. Tower grew 33%. In an industry where 10% annual growth is considered good, these are exceptional rates.
It does not stay in the numbers. These three companies employ thousands in Israel, many in the periphery. Migdal HaEmek, a relatively small town in the Jezreel Valley, is a striking example: a small northern town home to both a Tower fab and Camtek's headquarters. This kind of high-tech looks nothing like a Tel Aviv startup. It needs plants, labs, engineers, technicians and production staff, and it creates stable employment for years.
The other side of high-tech
In recent weeks most headlines about Israeli tech have been about layoffs. Software companies such as Atera, Fiverr and others are cutting, some citing AI. An analysis in Calcalist described it as high-tech 'splitting in two': software under pressure, chips and infrastructure growing. This week's results are the clearest proof of the other side of that split.
It also explains why the tech job market looks so different depending on who is looking. An app developer looking for work may feel the industry is shrinking. An optics engineer, a physicist or an image-processing expert may find they are more in demand than ever. AI does not only replace work; it also creates enormous demand for certain skills.
What could go wrong
There are risks, of course. The chip industry is famously cyclical: periods of huge investment alternate with oversupply and cuts. If AI spending slows, for example because the giants find it is not paying back fast enough, they will cut orders, and equipment makers will feel it first. This week, US voters rejected nearly every local measure on new data centers, a reminder that this building boom has limits too.
Another risk is China. A significant share of chip-equipment revenue comes from Chinese customers, and US restrictions on exporting chip technology to China hang over the whole field. Add geopolitical tension around Taiwan, home to much of the world's advanced chip production. Any shock there would be felt across the chain, including in Israel.
What the state can do
These companies' success also raises a question for the state. The chip industry needs things a software startup does not: land, stable electricity, water, transport links to the periphery, and above all people. Not only engineers with advanced degrees, but also technicians, operations staff and production workers. Technical colleges, training tracks in the north and south and cooperation between companies and academia may decide whether this growth stays in Israel, or whether the companies prefer to expand in countries where it is easier to build a plant and hire.
Bottom line
Still, this week's picture is clear. While the world argues whether AI is a bubble, a few Israeli companies are profiting from it now, in real money, quarter after quarter. They do not promise to change the world. They simply sell the tools without which the chips that will change it cannot be built. There is something very Israeli about that: not necessarily building the shiny product, but being the link nobody can do without.
