Nomura believes the AI infrastructure investment cycle still has room to run despite the recent pullback in semiconductor stocks.
The bank said continued supply shortages, rising data center demand and strong hyperscaler spending could support further gains across the AI hardware sector.
Semiconductor Stocks Pull Back After Powerful Rally
Nomura analyst Aaron Jeng said the Philadelphia Semiconductor Index, also known as the SOX, has risen sharply over the past year.
The index has gained approximately 85% since Nomura’s previous cycle update in March.
It has also climbed around 211% since the firm revisited the AI investment theme in May 2025.
After such a strong advance, Jeng said the recent correction should be viewed as healthy rather than as proof that the cycle has ended.
Nomura Highlights Several Near-Term Risks
Although the long-term outlook remains positive, Nomura identified several risks that could create further volatility.
These include mismatches in component supply, pressure on hyperscalers’ free cash flow in 2027 and broader macroeconomic risks linked to rising bond yields.
Higher financing costs could also reduce investor appetite for richly valued technology and semiconductor stocks.
Hyperscaler Spending Could Rise Further
Nomura does not believe AI infrastructure spending has reached its peak.
The bank said major cloud companies may need to increase capital expenditure further through 2027 to meet rising demand for computing power.
This could happen even if free cash flow remains under pressure.
Surging memory prices are also expected to raise the cost of building and operating advanced AI data centers.
Data Center Tracking Points to More Upside
Nomura’s proprietary data on global data center construction suggests that investment could exceed the firm’s previous estimates.
The bank said current buildout trends point to continued expansion across AI infrastructure projects.
This supports the view that spending on servers, networking equipment, memory and custom semiconductors could remain elevated.
Data Center Capacity May Stay Tight Into 2027
Nomura also expects supply constraints to remain a major issue.
Greenfield data centers that began construction in late 2025 may require around two years to complete.
As a result, available capacity could remain insufficient heading into 2027.
The supply bottleneck may also shift away from large manufacturers such as TSMC and toward smaller component suppliers.
These companies may struggle to expand production quickly enough to meet industry demand.
Price Increases Could Support Earnings Growth
Nomura said higher product prices and continued upward earnings revisions would remain important catalysts for semiconductor stocks.
If suppliers retain pricing power, stronger margins could support additional gains across the sector.
Improving earnings forecasts would also help justify the high valuations attached to many AI infrastructure companies.
Nomura Remains a Buyer on Weakness
Jeng said Nomura would continue buying selected semiconductor stocks during periods of market weakness.
The bank views the recent pullback as a correction within a continuing investment cycle rather than the start of a lasting decline.
For now, strong hyperscaler spending, limited data center capacity and persistent supply constraints suggest the AI infrastructure boom may not yet have reached its peak.
