Key Takeaways: The semiconductor bull market has room to run, with Nomura projecting an "unprecedented" supply chain mismatch that will sustain pricing power and earnings upgrades through 2027.
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Nomura says chip cycle hasn't peaked, forecasts 78% AI server growth in 2026
The PHLX Semiconductor Index's 80% second-quarter surge has investors questioning whether the cycle is peaking. Nomura's answer: not yet, as hyperscalers are locked into spending through 2027 and a historic component shortage is only beginning.
"The market hasn't even dealt with some of the risks and shortages to come," Aaron Jeng, head of Taiwan equity research at Nomura, said in a 119-page report published Tuesday. He cited "the likely biggest-ever component supply mismatch" as a key risk.
Nomura expects global AI server revenue to grow 78% in 2026 and 76% in 2027, up from its prior forecast of 43% for 2026. The team raised its overall server revenue growth estimate to 74% for 2026, driven by hyperscaler capital expenditure that shows no signs of slowing. Rising memory-chip costs and accelerated data-center construction plans are forcing Microsoft, Google, Meta and Amazon to keep spending, the analysts said.
The supply crunch could reshape the AI chip competitive landscape. Nomura expects Nvidia to command about 55% of TSMC's CoWoS advanced packaging capacity in 2027, while Google's TPU share rises to 27% from 23% in 2026, squeezing rivals including AMD and Amazon. The report identified nine Asian semiconductor stocks as beneficiaries, starting with TSMC and including ASE Technology Holding, MediaTek and GlobalWafers.
The Coming Supply Crunch
New fabrication plants take about two years to build, keeping capacity constrained through at least 2027, Nomura said. While TSMC has "turned aggressive" with its chip-on-wafer-on-substrate (CoWoS) packaging plans — a critical process that enables high-performance AI chips to function — the company doesn't control the substrate base those chips sit on. That dependency on smaller suppliers creates a bottleneck few investors are tracking, the analysts said.
Nomura expects TSMC to fall short of its 2027 CoWoS output target of 2 million wafers, with actual production reaching about 1.8 million. The shortfall will have "profound implications" for companies selling AI chips and those building their own, the report said.
The imbalances will worsen as Nvidia's next-generation Vera Rubin platform and Amazon's in-house Trainium 3 chips ramp up in the second half of this year. That could spill into non-AI sectors such as consumer electronics and automotive, where supply chain price hikes may accelerate as shortages deepen.
Wafer-on-substrate components, printed circuit boards, copper-clad laminates, IC substrates, high-end capacitors, power management chips and optical components are all already in short supply, Nomura said. The report noted that many component suppliers underestimated the AI-driven order upside when planning capacity expansions.
Data Center Buildout Accelerates
Nomura's proprietary tracking shows global data center projects have increased to 280 from 240 previously, with about 50 now at gigawatt scale. The firm expects 32 gigawatts of new compute deployment by 2027, with 23 gigawatts of visibility already for 2028.
Beyond the US hyperscalers, China is drafting a national AI compute network plan that would invest $295 billion over five years to connect distributed data centers by 2028, according to Bloomberg News. Neocloud providers such as CoreWeave are also absorbing hardware that Big Tech passes up, keeping secondary demand strong, Nomura said.
The server CPU market is getting an unexpected boost from agentic AI — autonomous AI systems that require low-latency, high-bandwidth processors for task orchestration. Nvidia Chief Executive Officer Jensen Huang said the company's Vera CPU is designed specifically for agentic AI workloads. AMD CEO Lisa Su projected the server CPU total addressable market will exceed $120 billion by 2030, while Arm CEO Rene Haas called the data center CPU opportunity a "hundred-billion-dollar" market.
Nomura reiterated buy ratings on nine Asian AI technology companies and raised target prices across the board. The firm's top picks include TSMC as the core AI chip enabler, ASE Technology Holding for packaging demand, and MediaTek, which stands to benefit from Google's expanding TPU market share. Silicon wafer suppliers GlobalWafers, Wafer Works Corp. and Formosa Sumco Technology Corp. are also positioned to gain as they signal further price increases for the second half of the year, with 6-inch, 8-inch and 12-inch wafers all in active price negotiations.
The recent pullback in semiconductor stocks represents a buying opportunity, Nomura said, as sustained pricing power and earnings upgrades remain the biggest drivers for the sector.
This article is for informational purposes only and does not constitute investment advice.
[1] Nomura rebuts the "semiconductor peak theory": "Epic shortage" is coming, price hikes and earnings upgrades remain the biggest catalysts[2] Overlooked bottlenecks and hyperscalers forced to keep spending will keep the chip-stock rally alive, says Nomura team[3] Why it's too early to call a top on semiconductor stocks, according to these highly regarded analysts[4] The data center boom is making the memory shortage even worse[5] Taiwan silicon wafer suppliers signal further price hikes
