Nomura has refuted market concerns about the AI semiconductor cycle reaching its peak in a recent report. The firm argues that with the ongoing expansion of capital expenditure by cloud providers, a severe supply chain mismatch in the second half of 2026 will not signal the end of the cycle but rather confirm the long-term sustainability of the current boom.
The report indicates that the continuous expansion of cloud provider capital expenditure could lead to a monumental supply chain mismatch in late 2026. Shortages in components like advanced packaging, PCBs, and CCL are expected to drive price increases and ongoing upward revisions to profitability.
Nomura emphasizes that while Taiwan Semiconductor Manufacturing (TSM) is aggressively expanding its wafer-level packaging capacity, the true supply bottleneck will shift to smaller components such as wafer-level substrates (WoS), printed circuit boards (PCBs), and copper-clad laminates (CCL).
The firm notes that supply shortages have already emerged for substrate components, printed circuit boards, copper-clad laminates, IC substrates, high-end capacitors, power management chips, and optical components. Many component suppliers are reportedly underestimating the growth in AI-driven orders when planning capacity expansions.
Regarding AI chip capacity allocation, Nomura projects that by 2027, Nvidia will command 55% of TSM's CoWoS capacity, while Google's TPU share is expected to jump from 23% in 2026 to 27%, potentially squeezing out space for other manufacturers like Advanced Micro Devices (AMD).
Furthermore, the rise of agentic AI is unexpectedly boosting demand for server CPUs. AMD forecasts the server CPU market will exceed $120 billion by 2030.
Based on this analysis, Nomura has raised price targets for nine Asian AI technology companies, with TSM as its top pick. The firm is also optimistic about MediaTek and ASE Technology Holding.
Nomura views the recent pullback in semiconductor stocks as a buying opportunity, asserting that sustained pricing power and earnings upgrades remain the sector's primary catalysts.
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