AI chip feast harbors crash risk: Philadelphia Semiconductor Index plunges nearly 14% since October, clients drawn into cyclical reversal

BlockBeats news, October 17 — The AI boom has driven semiconductor companies' profits to repeated record highs, but the market is beginning to worry that the industry may repeat a cyclical crash. According to data cited in the article, global semiconductor sales growth in the first half of 2026 hit its highest year-on-year pace since the 1980s, TSMC posted a record profit for a sixth consecutive quarter, and Samsung Electronics also set a new profit high for a fourth straight quarter. However, the Philadelphia Semiconductor Index has fallen nearly 14% since October 6, as investors begin to reassess the sustainability of the AI super-cycle.

Unlike the past, this round of semiconductor expansion is characterized by higher supplier concentration and stronger corporate cash flow. TSMC's capital expenditure is expected to be about $62 billion this year and may rise to $76 billion next year, but its capacity expansion relies mainly on operating cash flow rather than large-scale borrowing. The concentration of advanced process and memory chip markets among a few manufacturers has also strengthened suppliers' pricing power.

More noteworthy is that chip companies are shifting part of the demand risk to customers through long-term contracts. Nvidia has committed to invest more than $250 billion to secure chip supply and related components through January 2029; Micron, through "take-or-pay" contracts, has locked in part of its business through 2030 in advance, with committed amounts reaching $32 billion. Such contracts require customers to pay as agreed even if they do not take delivery.

This means that even if the AI investment boom fades, chipmakers may still gain some buffer through prepayments and long-term orders, but customers will bear greater procurement and financial risks. Nevertheless, if demand plunges and capital expenditure contracts, chip prices, corporate profits and highly valued stocks could still suffer. The cyclical pattern of the semiconductor industry may not disappear; it is just that the cost of the next downturn may be shared by both suppliers and customers.