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SEMICONDUCTOR RESILIENCE

The semiconductor sector has been thriving as AI momentum buoys markets even as Iran war uncertainty persists.

Updates from major semiconductor companies sparked a rally this week, with Advanced Micro Devices AMD.O forecasting quarterly revenue above expectations on robust demand for its data center chips.

"The sector has continued to outperform, and the explanation lies in confidence that the AI investment cycle outweighs competing macroeconomic and geopolitical pressures," Tobias Keller, investment strategist at UniCredit, said in a note.

The PHLX chip index .SOX has soared around 47% so far this quarter, while South Korea's KOSPI .KS11 rose over 13% this week on an AI-driven rally, its best week since 2008.

Keller noted that unlike in other tech cycles, demand for chips largely comes from hyperscalers, governments and enterprises building AI infrastructure.

"This investment‑led demand has cushioned semiconductor revenues against the immediate effects of higher energy costs and logistics friction," he said.

Semiconductors' earnings profile also helps explain the sector's resilience, Keller said, explaining that "cash flows are comparatively front‑loaded, margins are cyclical and earnings remain closely tied to investment spending."

And as the industry deals with a global supply chain, which passes on higher input costs rather than containing them, strong performance "points to confidence in industry‑wide pricing power and earnings delivery."

(Sophie Kiderlin)

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