MW Why it's time to start discussing semiconductors like commodities: There may be a supercycle

By Barbara Kollmeyer

Ned Davis Research says computing power and chips have been integrated into the economy

Advanced chips are here to stay, and that may mean a supercycle is coming, says Ned Davis Research.

The charge into chips by investors has been something to behold. Running underneath the frenzy and a near 80% year-to-date gain for the PHLX Semiconductor Index SOX is the argument that the artificial-intelligence build-out needs advanced chips, perhaps more than the industry can supply.

That hasn't assuaged concerns among some that a dot-com-style bubble may be building, especially given the sharp run-up. A May survey from Bank of America found that 73% of global fund managers view "long global semiconductors" as the most crowded trade, well up from 24% the prior month when it tied with oil.

Read: Micron investors are partying like it's 1987. Analysts say the stock still looks pretty cheap.

Our call of the day from Ned Davis Research strategist Pat Tschosik and analyst Philippe Mouls raises an opposing argument to the bubble view - that a supercycle may be starting for chip companies.

"Just the thought of suggesting we are in a semiconductor supercycle and not a bubble reminds us of the five most dangerous words in investing: 'it is different this time,'" they told clients in a note on Wednesday.

But to make the case that semis are not in a typical boom-bust cycle, their argument is that "compute power is becoming infrastructure like railroads, utilities and the internet."

They also see demand for chips no longer driven by PCs and smartphones, but by AI models that will lead to exponential growth of that demand. That's as chip usage continues to expand, used in robotics, humanoids, smart grids, defense systems, automotive and more. At the same time, leading-edge chipmaking will continue to face supply constraints due to capital requirements and the time needed to develop foundries, they said.

More rationale for a commodity-style supercycle? Threats of a boom-bust cycle have been reduced by increased orders from hyperscalers. Finally, the strategists argued that companies will spend and invest more in chips as they get an increasingly higher return on investment from AI.

Tschosik and Mouls conceded there's a bubble argument to be made as well: hyperscaler capex may eventually normalize, profitability over AI remains uncertain and adoption may not go as fast as expected.

Demand may also need time to catch up with that extra datacenter horsepower, while macro cycles are still an important consideration. "Demand for PCs, smartphones, autos, robotics, etc. is still cyclical and subject to fluctuations in the economic cycle," they said.

Tschosik and Mouls said they see a decent chance that "we are more in a late 1990s internet build-out scenario and that overbuilding feels inevitable." They noted the S&P 500 Semis & Semi Equipment group's 45% rally in 30 days was something that also happened in 1998, 2001 and 2002. The 1998 case they view as most relevant - that bubble burst two years later.

Whatever side of the argument an investor is on, they said figuring out the peak will be most crucial. And the difficulty of determining that lies in the fact that fundamentals tend to look good even after stock prices top. For example, worldwide semiconductor billings growth peaked in August 2000, six months after the late March 2000 peak for stocks, said the pair.

"We have specific things we are looking for at the top like a high percent of companies that meet our bubble definition, slowing capex guidance from the hyperscalers and a weakening in memory stocks (Micron, SK Hynix, Samsung).

"However, the most alarming signal we know of is when companies report exceptional earnings results and the stocks have a sharp negative reaction. That was clearly not the case this quarter, but we remain on high alert," they said.

The markets

U.S. stock futures (ES00) (YM00) (NQ00) are dropping, as oil prices (CL.1) (BRN00) climb over 3% and the 10-year Treasury yield BX:TMUBMUSD10Y is rising after three days of declines.

   Key asset performance                                                Last       5d      1m       YTD     1y 
   S&P 500                                                              7520.36    1.18%   5.39%    9.86%   27.71% 
   Nasdaq Composite                                                     26,674.73  1.54%   8.11%    14.77%  39.65% 
   10-year Treasury                                                     4.497      -7.60   12.20    32.50   7.30 
   Gold                                                                 4388.5     -3.43%  -5.34%   1.30%   31.29% 
   Oil                                                                  90.5       -7.65%  -14.14%  57.64%  48.56% 
   Data: MarketWatch. Treasury yields change expressed in basis points 

The buzz

The U.S. launched fresh strikes on Iranian targets. Iran said it retaliated against a U.S. base.

Snowflake stock (SNOW) is surging nearly 40% after forecast-beating results from the cloud software company.

Marvell shares $(MRVL)$ are dropping despite an upbeat earnings report and revenue outlook for the custom-chip maker.

Can Salesforce (CRM) buck AI disruption? Mixed results didn't offer much guidance and shares are falling.

Costco $(COST)$, Dell $(DELL)$ and Autodesk $(ADSK)$ report after the close

The Fed's preferred personal-consumption expenditures index for April is due at 8:30 a.m., along with the second revision to first-quarter GDP, weekly jobless claims and durable-goods orders. New home sales for April are due at 10 a.m.

New York Fed President John Williams will speak at 8:55 a.m., the first of several regional central-bank officials due to speak.

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Top tickers

These were the top-searched tickers on MarketWatch as of 6 a.m.:

   Ticker  Security name 
   NVDA    Nvidia 
   TSLA    Tesla 
   MU      Micron 
   TSM     Taiwan Semiconductor Manufacturing 
   AMZN    Amazon 
   AMD     Advanced Micro Devices 
   SNOW    Snowflake 
   MSFT    Microsoft 
   GME     GameStop 
   NBIS    Nebius 

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Beyond the headlines

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-Barbara Kollmeyer

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May 28, 2026 07:02 ET (11:02 GMT)

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