Analysis

Chip Stocks Race Toward Biggest Gains Since Dotcom Era on AI Demand

Published

2 months ago

May 28, 2026

On Wednesday, May 27, South Korea’s benchmark Kospi index crossed 8,228 points — a single-session surge of 4.65% that pushed its year-to-date return to exactly 100%. Two chipmakers drove it there. SK Hynix, Nvidia’s primary supplier of high-bandwidth memory, climbed 9.21% in the session and crossed the $1 trillion market-capitalisation threshold for the first time in its history. Samsung Electronics followed, up 2.68%, having crossed that same mark just weeks earlier. The benchmark’s performance now approaches the Nasdaq 100’s 102% surge in 1999 — right before the dotcom bubble burst. That comparison is everywhere right now. The question is whether it illuminates or misleads. Business Standard

The chip sector’s current ascent did not emerge from nowhere. It is the downstream consequence of a capital commitment so vast it has few modern precedents. The five largest hyperscalers — Amazon, Alphabet, Microsoft, Meta, and Oracle — have collectively committed more than $600 billion in capital expenditure for 2026, a 36% jump from 2025 and more than four times what the entire publicly traded U.S. energy sector spends annually on drilling, refining, and distribution. Goldman Sachs’ Global Institute puts the cumulative AI infrastructure bill at approximately $7.6 trillion between 2026 and 2031, spanning compute, data centres, and power infrastructure. Investing.com Goldman Sachs

Chips sit at the centre of every line in that ledger. What has happened to semiconductor equities since that spending unlocked is a story about what happens when extraordinary demand meets a supply chain that is structurally incapable of responding quickly — and about how fast markets can price the gap between those two things.

Chip Stocks Post Dotcom-Scale Gains as AI Demand Reshapes Global Equity Markets

The semiconductor industry’s market capitalisation has grown more than fourfold since the AI boom began, climbing from $2.2 trillion in May 2023 to $9.4 trillion in April 2026. That expansion — compressed into three years — eclipses the pace of the late-1990s technology build-out in raw velocity. Morningstar

South Korea’s Kospi is the most vivid single expression of this run. According to Korea Exchange data, Samsung Electronics has surged 149% year-to-date, while SK Hynix has climbed 215%, serving as the primary engines of the entire index’s rally. Together, the two chipmakers account for more than 42% of the Kospi’s market capitalisation, a record concentration that has made the index a de facto leveraged bet on the global AI supply chain. Disruption Banking CNBC

The American semiconductor picture is only marginally less spectacular. The VanEck Semiconductor ETF — the sector’s clearest benchmark vehicle — rallied nearly 49% in 2025, its third straight year of gains and a continuation of a run that began with a more than 72% surge in 2023. Over the same period, AMD’s AI accelerator revenue climbed 289% and Broadcom’s accelerator revenue surged 840% between the March 2023 and March 2026 quarters. These are not the numbers of a normal cycle. CNBC Morningstar

What connects them is a single supply constraint the market has only recently begun to price properly: high-bandwidth memory, or HBM.

HBM is the specialised memory architecture required to run large AI models at scale. It is power-efficient, extraordinarily dense, and technically brutal to manufacture — each generation requiring chipmakers to stack silicon wafers with sub-micron precision at volumes that push the limits of yield. Micron confirmed on its fiscal Q1 2026 earnings call that its HBM capacity was sold out through the entirety of calendar year 2026. SK Hynix controls an estimated 57–62% of global supply. And gross margins on HBM production have reached 60–70%, dramatically higher than the margins on standard DRAM. Investors have done the arithmetic. Manufacturing Dive

The data centre revenue figures for Nvidia make the demand side equally clear. In its fiscal year 2026, the company reported data centre revenue of $193.7 billion out of total revenue of $215.9 billion — a figure that transforms the company’s historical identity as a gaming-chip maker into something more like a sovereign infrastructure provider. Of the U.S. Market Index’s 85.6% gain since May 2023, 22.76 percentage points come from semiconductor stocks, of which 12.2 points come from Nvidia alone. One company’s earnings power has become a meaningful factor in national wealth creation. Morningstar

Why This Rally Looks Different From 1999 — And Why That Still Doesn’t Mean It’s Safe

What is driving semiconductor demand in the AI era?

AI demand is fuelling semiconductor growth through a convergence of AI accelerator chips led by Nvidia’s Blackwell architecture, high-bandwidth memory needed to train and run large language models at scale, and power-dense data centre infrastructure. Nomura describes a “triple memory super-cycle spanning DRAM, HBM and SSD memory” since the third quarter of 2025, and forecasts annual revenue and earnings growth of roughly 30% for memory suppliers over the next three to five years, following an estimated seven- to eightfold profit increase in 2026. CNBC

The dotcom comparison is not wrong, but it is partial. The late-1990s run in technology equities was primarily a valuation event: companies with no revenue, no product, and sometimes no coherent business model attracted capital because connectivity was understood to be transformational. What was unclear then was when, how, and for whom that transformation would monetise. Speculative capital flooded in ahead of any earnings. The capacity being built — fibre-optic networks, server farms — was eventually used, but not before it buried the companies that built it.

The current semiconductor rally has a different texture. Earnings are real. Revenue is growing. The spending driving chip demand is not investor sentiment but committed corporate capex from companies with balance sheets thick enough to sustain it through years of uncertainty. Goldman Sachs describes the Kospi as its “highest-conviction equity market” in the region, forecasting 300% earnings growth in 2026 — the strongest annual profit expansion in any Asian market since the 1999 Asian financial crisis recovery. Goldman’s 12-month Kospi target stands at 9,000; JPMorgan’s bull case goes to 10,000. Disruption Banking

The structural argument rests on two legs. First, AI workloads are not discretionary in the way earlier technology adoption waves were. Companies that fail to build or buy AI infrastructure do not simply grow more slowly — they risk obsolescence in markets where AI-native competitors move faster and cheaper. That creates a degree of demand inelasticity that typical semiconductor cycles have lacked. Second, the mix shift in memory consumption has been profound. Servers now account for 60–70% of memory demand, up from roughly 30% before the AI boom began, according to analysts at Jefferies. That shift is permanent unless a competing architecture emerges requiring less memory — something no credible roadmap currently proposes. Fortune

Yet the word “structural” is doing a great deal of work in bullish analyst reports right now. Permanent cycles have a way of revealing themselves as long cycles. The distinction matters enormously for investors entering at today’s prices.

The Downstream Consequences: Consumer Electronics, Geopolitics, and the Price of Concentration

The gains are generating their own side effects, and they are not uniformly positive.

The reallocation of manufacturing capacity toward HBM is crowding out conventional DRAM and NAND production. The total number of wafers a fab can produce is fixed at any given point. Producing HBM displaces commodity memory. Consumer electronics — smartphones, laptops, game consoles — compete for what remains. Nintendo raised the price of the Switch 2 in part because memory input costs rose. PC manufacturers are absorbing higher bill-of-materials charges. The memory tax on everyday devices is not abstract: it is already surfacing in retail prices, and it will persist structurally so long as AI data centre construction continues at current rates. Samsung is expanding HBM capacity by 50% in 2026, partly at its $17 billion facility under construction in Taylor, Texas — but that capacity will not be fully online in time to relieve the immediate shortage.

The geopolitical dimension is pointed. Taiwan’s Taiex is being driven by TSMC, which now accounts for over 40% of that benchmark’s market capitalisation and holds roughly 68% of global foundry revenue by advanced nodes. South Korea’s Samsung and SK Hynix, between them, supply the dominant share of global HBM. The global AI buildout — a $7.6 trillion investment program made primarily by American hyperscalers — runs through a narrow geographic corridor in East Asia. Allianz Research has noted that this concentration creates a scenario where the entire AI infrastructure programme is effectively hostage to a handful of facilities in a narrow geographic corridor — a rebalancing that could, over time, be addressed by semiconductor capacity investments in Europe and the U.S., but those will not mature in time to alter the current cycle’s supply dynamics. CNBC Allianz

Bank of America estimates the total addressable market for AI data centre systems will reach over $1.2 trillion by 2030, representing a compound annual growth rate of 38%, with AI accelerators alone representing a $900 billion opportunity. Those figures provide the macro ceiling. What they don’t tell you is how the gains within that market distribute across suppliers, geographies, and time — and the current distribution is unusually narrow. Yahoo Finance

The Kospi’s daily average trading value surpassed 40 trillion won for the first time this month, reaching a record 48 trillion won — but Samsung and SK Hynix alone account for 43% of that total. An index that rises on two stocks is not diversification. It is sector exposure dressed in national-market clothing. Disruption Banking

The Case for Caution: What Chip Bears Are Actually Arguing

Not everyone finds the “structural” framing convincing — and the most substantive critique deserves a fair hearing.

The core bear argument is not that AI demand is fake. It’s that cycles have a way of reasserting themselves, and that the current valuation run is pricing in a scenario with no setbacks, no substitution effects, and no demand disappointments. Memory chip economics have been notoriously cyclical. The industry’s last sustained boom — driven by cloud computing and smartphone adoption — collapsed into one of the worst sector downturns in decades between 2022 and 2023. Those who argued that secular demand had permanently broken the cycle in 2021 were not wrong about the demand thesis; they were wrong about the timeline and the magnitude of the overshoot.

A chip expert at Harvard struck this note in a recent interview, warning that memory markets have been here before and that “this too will pass.” The observation is not contrarianism for its own sake. It’s a reminder that scarcity, in semiconductor history, reliably attracts supply — and that supply, when it arrives, tends to overshoot the demand it was chasing. Fortune

The concentration risk at the index level amplifies this concern. Goldman Sachs strategist Tim Moe’s observation to CNBC that “it’s the AI hardware theme that’s clearly what is propelling things” is candid acknowledgement that the breadth of these rallies is thin. When Samsung and SK Hynix account for 42% of the Kospi, any demand deceleration, yield disappointment, or hyperscaler capital expenditure revision doesn’t just hit two stocks — it hits the national benchmark. CNBC

There is also the architecture question. Nvidia announced in October 2025 that it intends to use LPDDR5 — a lower-power, cheaper variant of consumer DRAM — for inference GPUs by the end of 2026. If inference workloads, which are growing faster than training workloads, shift toward memory architectures that don’t require HBM’s premium engineering, the margin story changes materially. The market has priced in a world of permanent, high-margin scarcity. Scarcity, in this industry, has always eventually produced its own cure.

The honest answer to whether 2026 is 1999 again is: not quite, and not entirely different either.

The earnings are real. The demand is structural. The spending commitments are in writing and backed by corporate balance sheets that did not exist in the last millennium’s internet frenzy. The hyperscalers are not startup dreamers burning venture capital; they are the most profitable companies on earth, allocating capital with clear awareness of what pulling back would mean competitively. That backstop — genuine, cash-generating demand from entities that cannot afford to stop spending — is something the dotcom era never had.

Yet markets that price perfection are vulnerable to the imperfect. The semiconductor industry has never produced a cycle that matched its most optimistic projections from the peak. Technology always wins the long game. The companies that own the technology don’t always win along with it.

The chip rally of 2025 and 2026 is simultaneously a genuine reflection of structural change and a warning about what happens when markets are given permission to price in only the best version of that change. The gains are real. So is the distance between the price and the proof.

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Analysis

Pakistan’s $10bn US Facility Request: Inside the New Gulf Capital Triangle

Published

18 hours ago

July 30, 2026

Abdul Rahman

Pakistan’s finance minister spent the week of July 20 in Washington doing something Islamabad has rarely been able to do from a position of relative strength: asking for a safety net rather than a rescue. In meetings with US Treasury Secretary Scott Bessent, Muhammad Aurangzeb requested a $10 billion Exchange Stabilisation Support Facility, framing it as insurance for a currency and reserves position that, by his own account, has already stabilised without emergency help — improved fiscal and external balances, record remittances and stronger reserves.

The request is easy to read as routine diplomacy. It is more useful read as a symptom of a structural shift now visible across three of the markets in this briefing set — Pakistan, the UAE, and the United States — in how mid-sized emerging economies are financing themselves after two years of IMF-led stabilisation.

The numbers behind the ask

Pakistan’s economy grew 3.7% in FY26, the fastest pace in four years but still short of official targets, according to the government’s own economic survey. The same survey reported a KSE-100 rally of 18.4% in the July–March period, a current account deficit contained near zero, and public debt-to-GDP falling from a 2023 peak of 75% to 68.5%. The IMF’s own country data lists 2026 real GDP growth at 3.6% and consumer price inflation cooling to 7.2%, a marked drop from the double-digit prints of recent years.

None of that happened by accident. It followed the disbursement structure typical of Pakistan’s current IMF-EFF arrangement: $1.2 billion in EFF funding, plus $2.7 billion from multilateral partners, $1.1 billion in bilateral development financing and $2 billion via Naya Pakistan Certificates during the July–March window alone. A separate IMF staff report on the programme’s second review flagged that Pakistan met most quantitative benchmarks but missed a structural condition on sugar-import tax exemptions and delayed cabinet approval of sovereign wealth fund governance reforms — a reminder that “stabilised” and “reformed” are not the same thing in IMF language.

Why Washington, and why now

The $10 billion ask did not happen in isolation. Aurangzeb’s Washington trip also included direct engagement on the broader US tariff regime announced under the International Emergency Economic Powers Act, and a separate meeting with Honeywell Technologies about modernising Pakistan’s refinery sector. According to Pakistan’s finance ministry, both governments agreed to identify near-term investment transactions and finalise a strategic economic framework, expected to be signed on the sidelines of the UN General Assembly in September 2026.

That timeline matters. It places a formal US-Pakistan economic framework roughly two months after the current 60-day IMF review cycle and in the same window that Gulf sovereign investors — the UAE and Saudi Arabia chief among them — have been rolling over short-term deposits with the State Bank of Pakistan, a practice that has quietly become one of Islamabad’s most reliable bridge-financing tools. Business Recorder’s economy desk reported friendly countries rolling over roughly $6 billion in July 2026 alone, extending a pattern that predates this administration but has become more central to it.

The Gulf link most coverage misses

Coverage of Pakistan’s IMF programme tends to treat Washington, Riyadh, Abu Dhabi and the multilateral lenders as separate storylines. They are increasingly one story. The UAE’s own trade data shows non-oil foreign trade approaching AED 2 trillion in the first half of 2026, a record, with the emirate simultaneously deepening financial-sector ties across South Asia, Africa and now — via a newly concluded Comprehensive Economic Partnership Agreement — Canada. Pakistan sits inside that same Gulf capital web: its rupee stability, its remittance base (heavily Gulf-sourced), and its rollover financing all trace back to the same handful of Gulf treasuries that are simultaneously recycling petrodollars into Dubai property, Abu Dhabi sovereign funds, and now formal free-trade frameworks with Western economies.

An Exchange Stabilisation Facility from the US Treasury would not replace that Gulf financing — it would sit alongside it, giving Pakistan a dollar-denominated backstop that is politically distinct from both the IMF and its Gulf creditors. For a country whose FY26 external financing already blends multilateral, bilateral, Gulf and diaspora sources, that diversification is arguably as important as the headline number.

What could go wrong

Pakistan’s economic survey data cuts both ways. Poverty climbed to 28.9% in FY2024-25 even as headline growth accelerated, and April 2026 inflation ticked back up to 10.9% before easing. A $10 billion facility addresses reserve adequacy and currency confidence; it does nothing for the domestic demand and poverty dynamics that Pakistani economists increasingly flag as the programme’s unfinished business. Whether Washington grants the facility — and on what conditionality — will be one of the more consequential but underreported bilateral economic decisions of the autumn.

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Analysis

China Criticizes US Bill Targeting Russian Oil Buyers — Why It Matters

Published

19 hours ago

July 30, 2026

Abdul Rahman

On July 15, 2026, during a routine Chinese foreign ministry press briefing, spokesperson comments took on unusual significance for global energy and trade watchers: Beijing strongly criticized recent US sanctions measures affecting Cuba and, more consequentially, proposed US legislation specifically targeting major purchasers of Russian energy, according to sanctions-tracking analysis from law firm Steptoe. The pairing of Cuba sanctions criticism with concern over Russian-energy-buyer legislation is not coincidental — both represent the kind of secondary sanctions architecture that could eventually be extended to reach China’s own energy trade.

Why China has reason to be worried

China has emerged as one of the largest buyers of discounted Russian crude since 2022, alongside India, as Moscow redirected exports away from European markets closed off by sanctions. That trading relationship has functioned largely outside direct US sanctions exposure because existing measures have focused on Russian entities, vessels, and price-cap compliance rather than directly penalizing the buying countries themselves. Proposed legislation targeting “major purchasers of Russian energy” would represent a meaningful escalation — shifting from supply-side sanctions on Russia to demand-side sanctions on Russia’s customers, a category in which China is unambiguously the largest player.

The broader sanctions context this fits into

This is not an isolated legislative proposal. The EU Council has separately been expanding its own sanctions lists to include entities active in Russia’s energy sector, specifically firms producing automated control systems for oil and gas infrastructure — a sector the EU explicitly identifies as a substantial source of Russian government revenue, with designated entities subject to asset freezes and travel bans. That EU action, combined with the US legislative proposal China is objecting to, suggests a coordinated Western push in mid-2026 toward tightening the demand side of Russian energy sanctions after several years of focusing primarily on supply-side measures — price caps, shipping insurance restrictions, and tanker interdiction — that CREA’s own monthly tracking has repeatedly shown to be only partially effective.

Why demand-side sanctions would be harder for China to absorb than supply-side measures

China’s exposure to a demand-side sanctions regime differs meaningfully from Russia’s own exposure to supply-side measures. Russia has adapted to supply-side sanctions through shadow-fleet shipping, price discounting, and using non-sanctioned intermediary buyers — mechanisms that work precisely because the penalty falls on specific vessels, entities, or transactions rather than on the buying country’s broader economy. A US measure targeting “major purchasers” as a category would be far harder for China to route around through the kind of intermediary and shadow-fleet workarounds Russia itself has relied on, since it would target China’s status as a buyer directly rather than any specific transaction or vessel.

The timing question: why July 2026 specifically

The proposed legislation surfaces at a moment when Russian oil revenues are themselves in flux — recovering somewhat due to the Iran-war-driven price spike after falling to some of their lowest levels since the 2022 invasion earlier in 2026. A US Congress moving to tighten sanctions on Russia’s energy customers at precisely the moment Iran-war-driven prices are already inflating Russian oil revenue suggests lawmakers are attempting to prevent Moscow’s accidental windfall from becoming a durable financing lifeline — a goal that requires closing the demand-side gap that has persisted throughout the supply-side sanctions era to date.

What China’s public criticism signals diplomatically

Beijing’s decision to criticize the proposal publicly, rather than simply lobbying against it through diplomatic channels, is itself a signal. Chinese foreign ministry statements on sanctions issues are typically measured and procedural; explicit public criticism paired with a separate objection to Cuba sanctions suggests Beijing is framing this as part of a broader pattern of what it characterizes as unilateral US extraterritorial sanctions overreach, a framing China has used consistently in disputes over technology export controls and is now extending to energy trade.

What comes next

The practical test will be whether the proposed legislation advances through Congress with enough bipartisan and administration support to become binding policy, or whether it remains a negotiating lever — a credible threat used to extract concessions from China on other fronts (trade, technology, Taiwan) without ever being formally enacted. Given the scale of China’s Russian energy imports and the diplomatic and economic disruption a genuine demand-side sanctions regime would cause, most sanctions analysts view near-term full enactment as unlikely, though the legislative threat itself already appears to be shaping Chinese diplomatic posture.

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Analysis

Malaysia GDP Growth vs Stock Market: The 2026 Disconnect

Published

2 days ago

July 29, 2026

Abdul Rahman

Malaysia posted its biggest trade surplus on record and second-quarter GDP growth of 5.8% in 2026, yet its stock market has stubbornly refused to rally — a disconnect that is puzzling investors even as the country climbs global competitiveness rankings and hosts record investor turnout at its largest retail investing event.

Record Growth Meets a Muted Market

Malaysia’s economy expanded 5.8% year-on-year in the second quarter of 2026, underpinning what former senior investment banker Ian Yoong Kah Yin describes as one of the most competitive economies globally, buoyed by the country’s largest-ever trade surplus, according to reporting in The Star. Yet with the exception of the semiconductor and plantation sectors, Yoong notes that many shares on Bursa Malaysia remain undervalued relative to that underlying strength — a gap he summarised memorably: “It’s like we held a party and no one came.”

The disconnect comes even as Hong Leong Investment Bank upgraded Malaysia’s full-year 2026 growth forecast to 4.7% from 4.5%, citing stronger-than-expected performance in the electrical and electronics sector alongside resilient domestic demand, according to BusinessToday. Household loans grew 5.2% year-on-year and credit card spending rose 10.2%, signalling that consumer demand remains a genuine pillar of growth rather than a statistical artefact of export strength alone.

A Competitiveness Ranking Jump — and a Retail Investing Boom

Malaysia’s underlying reform story has been validated externally. The country climbed eight places to rank 15th among 70 economies in the 2026 IMD World Competitiveness Ranking, its best showing in recent years, following an 11-place jump the year before, according to The Star. Economists attribute the climb to policy reforms improving government and business efficiency, streamlined investment approvals, accelerated digitalisation, and stronger fiscal management.

Retail investor enthusiasm, meanwhile, appears robust even if institutional capital has been slower to follow. INVEST Fair 2026, Malaysia’s largest retail investment event, drew an expected 20,000 visitors across more than 70 hours of programming at Kuala Lumpur’s Mid Valley Exhibition Centre in July, according to event coverage on TradingView. Separately, a survey of more than 3,500 active users by digital wealth platform Versa found that 70% of respondents would prioritise investing over debt repayment or emergency savings if they received a sudden windfall, according to The Star — evidence of a pronounced retail “investment reflex” even amid broader questions about household financial resilience.

Fixed Income Is Where the Real Money Is Flowing

While equities lag, Malaysia’s fixed income market tells a different story. Employees Provident Fund chief investment officer Mohamad Hafiz Kassim told the Sasana Symposium 2026 that Malaysia is “punching above its weight” on global fixed income indexes, drawing outsized capital allocation given interest rate and yield differentials between Malaysian Government Securities and US Treasuries — a dynamic occurring even as the ringgit has remained notably stable, according to The Star. Speakers at the same event pointed to the broader global shift toward passive investing as a structural tailwind Malaysia is well-positioned to capture with continued policy follow-through.

What Explains the Equity Gap

Analysts point to several possible explanations for the growth-market disconnect: persistent foreign investor caution tied to regional and Middle East-driven geopolitical risk, a valuation overhang from prior years, and sector concentration that leaves broad indices under-exposed to the semiconductor and technology names actually capturing AI-linked investment flows. Whatever the cause, the gap represents either an opportunity for value-focused investors or a warning sign that Malaysia’s headline growth figures are not yet translating into corporate earnings momentum broad enough to move the market.

What to Watch

The second half of 2026 will test whether Malaysia’s fixed income strength and competitiveness gains eventually pull equity valuations upward, or whether the stock market’s caution proves to be the more accurate signal about underlying corporate health. Continued data centre and semiconductor investment, alongside any further IMD-style competitiveness validation, will be key catalysts to track.