Manulife Investment Management, a global asset manager, has provided its outlook for the global semiconductor industry in the second half of 2026.
The semiconductor industry serves as a core driver of global economic development, providing essential technological support for long-term growth sectors such as artificial intelligence, cloud computing, and electrification. The industry is building a complete ecosystem based on structural demand growth and physical infrastructure investment. The sector delivered strong market performance in the first half of 2026, and we maintain an optimistic view on its future trajectory. Supported by robust earnings growth, sustained capital expenditure, and the still-early stage of enterprise AI adoption, the semiconductor industry's upward trend is expected to continue into the second half of 2026 and remain positive through 2027.
Key Growth Drivers: AI Benefits Spreading, Creating Investment Opportunities Across the Entire Supply Chain
Since the beginning of 2026, the semiconductor sector has significantly outperformed the global market. Backed by solid fundamentals, strong earnings momentum, and continued investment in AI infrastructure, related stocks across the semiconductor supply chain have generally seen price appreciation. We judge that this industry upcycle will extend into the second half of 2026 and 2027, with core support coming from the early stage of enterprise AI application adoption, ongoing expansion in industry capital expenditure, and a gradual improvement in upstream and downstream supply-demand dynamics. Investment opportunities are no longer confined to the AI theme but are gradually extending across all semiconductor sub-sectors, including central processing units (CPUs), power semiconductors, communication and connectivity technologies, and semiconductor equipment, providing investors with diversified allocation logic for building a complete semiconductor portfolio.
Against this backdrop, semiconductors have become a core contributor to the returns of major global stock indices in 2026, with overall performance substantially better than the broader market average. This rally is not limited to a single sub-sector but represents a broad-based upswing covering the entire industry chain, encompassing AI computing GPUs, memory chips, analog and power management chips, semiconductor equipment, and manufacturing tools.
The core drivers propelling this industry upturn include: a recovery in market investment sentiment and continuous improvement in corporate fundamentals. The underlying support stems from the ongoing expansion of AI infrastructure, the expansion of the memory chip market coupled with rising product prices, sustained corporate earnings recovery and upward revisions to market profit forecasts, expansion in industry capital expenditure alongside an accelerated equipment replacement cycle, and generally prudent capital management by companies. Furthermore, industrial support policies introduced by multiple countries globally, through measures to enhance supply chain security and support local chip capacity building, are benefiting industry development. These characteristics indicate that the current semiconductor rally represents a structural opportunity driven by the simultaneous expansion of the entire supply chain, rather than short-term speculation on a single theme.
Earnings, Capital Expenditure, and AI Scaling Form a Solid Foundation for Long-Term Growth
Looking ahead, we are optimistic that the semiconductor sector will continue its current upward trend into the second half of 2026 and 2027. The core rationale is: the accelerated adoption of AI at the enterprise level across various industries is still in its early stages in terms of overall penetration, leaving vast long-term growth potential; leading global technology companies have clearly outlined plans to significantly increase capital expenditure further in 2027, continuing to invest heavily in AI infrastructure; simultaneously, the capacity from new chip fabrication plants scheduled to commence operations in 2027 will gradually alleviate industry supply-demand gaps.
Current industry valuations are generally within a reasonable range. The stock price increase in the first half of this year was primarily driven by upward revisions to earnings expectations, rather than mere valuation bubble expansion. Coupled with ample global market liquidity and solid corporate financial fundamentals, the market continues to see significant industry financing and corporate IPO activities, which corroborate the sector's vitality. As the growth dividends enabled by AI gradually extend to more sub-sectors, non-AI semiconductor categories are also entering a recovery cycle, continuously broadening the investable opportunity set within the industry.
Computing, Power, and Connectivity: Emerging High-Potential Areas Deserving Attention
From the perspective of emerging industry trends, central processing units (CPUs), power management chips, communication and connectivity technologies, and semiconductor equipment are currently sub-sectors worthy of focused attention.
Computing: CPU demand is seeing incremental growth, with the CPU/GPU ratio gradually balancing. As agentic AI becomes more widespread, data center demand for CPUs will increase significantly—CPUs handle scheduling, control, and basic execution tasks in AI workloads. Market expectations for the scale of this segment are being continuously revised upward, with industry consensus predicting that the current GPU-to-CPU configuration ratio of approximately 8:1 will likely trend towards 1:1 in the long term.
Power Sector: Computing power generates massive electricity demand, with high-voltage architectures opening new growth avenues. As AI computing density continues to increase, global AI-related power load demand by 2030 could be nearly 100 times higher than current levels. Concurrently, the large-scale commercial adoption of 800V high-voltage DC architectures will bring new growth opportunities for the power semiconductor segment.
Communication & Connectivity: Optical and copper technologies advancing in parallel, supporting the scaled expansion of computing networks. With data transmission demands exploding and intra-system connectivity needs growing rapidly, communication and connectivity have become a core bottleneck constraining the expansion of computing systems. Continuous iteration in copper transmission technology, alongside the maturing of optical interconnect technology, will together support the ongoing expansion of computing networks, unleashing multiplicative growth potential during industrial-scale deployment.
Semiconductor Equipment: Extended upcycle to continue through 2027. The semiconductor equipment segment maintains stable growth momentum, driven primarily by rising order demand for advanced logic chips and memory chips, with the global chip capacity expansion cycle extending to 2027. Additionally, the strategic value of advanced packaging technologies in the AI era continues to increase, persistently driving equipment procurement demand.
Sector Core Risks and Key Monitoring Indicators
Geopolitical and Supply Chain Risk: The semiconductor supply chain possesses extremely high strategic importance. Changes in the geopolitical landscape can directly disrupt industry supply and demand, capital markets, and global economic stability, making it a variable requiring continuous, focused attention from investors.
Sustainability of AI Commercialization: Whether new AI application scenarios can continuously emerge at both the consumer and enterprise levels will directly determine the strength of industry demand and the sustainability of the growth cycle in 2027.
Industry Listing Activity as a Catalyst: If leading companies in the AI industry chain list on capital markets in a concentrated manner, it could enhance overall industry information transparency and further boost market investment confidence.
Cloud Service Provider Revenue Growth (a key observation indicator for H2 2026): The revenue growth performance of leading global cloud computing service providers in the second half of the year will be a crucial observation window for assessing whether the current high industry capital expenditure can translate into corporate profits and support medium- to long-term free cash flow improvement.
Conclusion
Overall, the long-term development logic of the semiconductor industry is supported by structural demand growth, sustained industrial capital investment, and opportunities across diversified sub-sectors. Unlike past cyclical rallies with stronger speculative attributes, the current industry growth is built upon the implementation of physical infrastructure and end-demand with viable commercialization scenarios, resulting in a more solid foundation for industry development. The growth dividends have already spread across the entire industry chain, with sub-sectors such as computing chips, memory, power management, communication & connectivity, and semiconductor equipment all benefiting in tandem. Investment choices are no longer highly concentrated in a few industry leaders. In this market environment, investment strategies that focus on balanced selection of quality stocks across regions, sub-sectors, and markets will see their value become increasingly prominent. Although the industry still faces risks such as cyclical fluctuations and external macroeconomic uncertainties, the long-term growth logic of the semiconductor industry remains clear and robust. It will continue to lead the next phase of global technological innovation and serve as a core pillar in global economic development.
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