Semiconductors: A Fleeting Boom?

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The iShares Semiconductor ETF – a curious vessel indeed, containing within its digital hull a collection of thirty companies, each jostling for prominence, yet constrained by a peculiar weighting scheme – experienced a rather spirited ascent in January. Twelve percent, to be precise. One might almost suspect a mischievous imp had taken possession of the algorithm, guiding it upwards with an invisible hand. It is a fund, one notes with a certain bureaucratic precision, that deliberately excludes those titans of the East – Taiwan Semiconductor, ASML Holdings – a decision akin to attempting to bake a pie without flour. A curious omission, surely, though perhaps dictated by a desire for…simplicity. Or perhaps a simple lack of imagination.

The prevailing narrative, of course, centers upon the artificial intelligence craze. A fever dream, if you will, fueled by GPUs from Nvidia – those gleaming black boxes promising untold computational power. But the true source of this recent effervescence, it appears, lies not in the grand ambitions of AI, but in the mundane reality of memory. DRAM, NAND flash… these humble components, previously relegated to the shadows, have suddenly found themselves at the center of attention. A most unexpected turn of events. It is as if the very foundations of the digital world are trembling with newfound demand.

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The Peculiar Logic of Inference

The shift, it seems, is from the laborious task of training these artificial intelligences – a process akin to forcing a reluctant student to memorize endless volumes – to the far more practical matter of inference. In essence, the application of these learned models to everyday tasks. One might envision a vast network of digital clerks, diligently processing requests, their tireless efforts powered by these very memory chips. A chillingly efficient prospect, to be sure. This migration has, predictably, ignited a demand for DRAM, NAND, and even the antiquated hard disk drive – a relic of a bygone era, yet somehow still relevant. The CPUs, too, have benefited – those tireless orchestrators of data, ensuring that everything runs smoothly, or at least, appears to.

The forecasts for both DRAM and NAND pricing have reached levels bordering on the fantastical. Trendforce, a name whispered with reverence in the halls of semiconductor analysis, predicts increases of 90-95% for DRAM and 55-60% for NAND. Such figures are enough to make even the most seasoned analyst question the very fabric of reality. It is as if the laws of supply and demand have been suspended, replaced by a capricious and unpredictable force. Micron, the largest weighting in this curious ETF, has, unsurprisingly, rallied a staggering 45.6% in January. A most fortunate company, indeed.

And then there is TSMC, a name that looms large over the entire industry. Though absent from the ETF itself, its earnings report was nothing short of spectacular, forecasting capital spending of $52-56 billion in 2026. A sum so vast it could likely fund a small nation. Such profligacy, one suspects, is driven not by rational economic calculation, but by a desperate attempt to outspend the competition, to build ever-larger factories, to dominate the landscape. The semiconductor equipment companies, naturally, are reaping the rewards. It is a vicious cycle, a relentless pursuit of growth, driven by an insatiable appetite for… well, for everything.

The gains from Micron and these equipment manufacturers were sufficient to offset the rather tepid performance of Nvidia, which rose a mere 2.5%, and the outright decline of Broadcom, which fell by 4.3%. A curious juxtaposition, one might observe. It suggests that even in the midst of a booming market, not all boats are lifted equally. Some, it seems, are destined to remain stubbornly anchored.

A February Chill

But the January exuberance, alas, has given way to a February chill. The SOXX is down 4.6% as of this writing, a consequence, it seems, of investors taking profits following the earnings report of Advanced Micro Devices. The guidance, it appears, fell short of expectations. A most disappointing outcome. Though, one suspects, the problem is not a lack of demand, but rather a logistical bottleneck, a simple inability to produce enough chips to satisfy the insatiable appetite of the market.

The capital spending forecasts from the major cloud companies, however, remain remarkably robust, suggesting that the AI infrastructure buildout is set for another strong year of growth in 2026. Whether this momentum can be sustained beyond that year is anyone’s guess. The future, as always, remains shrouded in uncertainty. But as of now, the most intelligent minds in the tech sector seem to believe that AI is a long-term, transformational technology. If that proves to be true, semiconductor stocks should continue to benefit. Though, one cannot help but wonder if this entire episode is simply a fleeting bubble, destined to burst at any moment. A most unsettling thought, to be sure.

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2026-02-07 15:33