Huo Xing Cai Jing reports that on October 17, the AI boom has driven semiconductor companies to record-breaking profits, but the market is beginning to worry that the industry may be repeating its cyclical downturn. According to data cited in the article, global semiconductor sales growth in the first half of 2026 reached the highest year-over-year rate since the 1980s; TSMC has posted record profits for the sixth consecutive quarter, and Samsung Electronics has set new profit highs for the fourth consecutive quarter. However, since October 6, the Philadelphia Semiconductor Index has declined nearly 14%, prompting investors to reassess the sustainability of the AI supercycle. Unlike previous cycles, this semiconductor expansion is characterized by higher supplier concentration and stronger corporate cash flows. TSMC’s capital expenditure this year is expected to reach approximately $62 billion, rising to $76 billion next year, yet its capacity expansion is primarily funded by operating cash flow rather than large-scale borrowing. The advanced process and memory chip markets are dominated by a few key players, enhancing suppliers’ pricing power. More notably, chipmakers are shifting part of their demand risk to customers through long-term contracts. NVIDIA has committed over $250 billion to secure chip supplies and related components through January 2029; Micron has locked in business through “take-or-pay” contracts totaling $32 billion, securing commitments through 2030. These contracts require customers to pay even if they do not take delivery. This means that even if the AI investment frenzy cools, chip manufacturers may still benefit from advance payments and long-term orders as a buffer—though customers will bear greater procurement and financial risk. However, if demand drops sharply and capital spending contracts, chip prices, corporate profits, and high-valued stocks could still suffer. The cyclical nature of the semiconductor industry may not have disappeared—only that the cost of the next downturn may be shared between suppliers and customers.
AI Chip Boom Faces Downside Risks as Philadelphia Semiconductor Index Drops 14% Since October
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Summary
The crypto market's Fear & Greed Index has declined as the AI chip boom shows signs of strain. The Philadelphia Semiconductor Index has dropped nearly 14% since October 6, 2026, despite record profits for TSMC and Samsung. NVIDIA and Micron are shifting risk to clients through long-term contracts, with $25 billion and $32 billion in non-cancelable orders, respectively. While chipmakers may be insulated from demand declines, clients now face greater financial risk. Altcoins to monitor may include those linked to AI infrastructure as the sector encounters uncertainty.
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