Silicon Euphoria: How AI's Insatiable Demand Drove Unprecedented Gains, And The Turn

The first half of 2026 will be remembered for a market phenomenon that saw the value of some chip manufacturers triple, or more, catapulting Asia Pacific stock markets sharply higher. This extraordinary surge was directly fueled by the insatiable appetite of AI companies competing fiercely for the chips vital to power their datacentres, creating a supply-demand imbalance that redefined market expectations.

South Korea’s Kospi index, for instance, soared by an astounding 125% this year, marking its strongest first half since at least 1990. This remarkable performance was predominantly driven by electronics behemoth Samsung, whose share price jumped 183%, and SK Hynix, which saw an even more dramatic rise of 310% since January. Both companies explicitly reported a significant increase in demand, underscoring the critical role of memory and semiconductor chips in the ongoing AI revolution.

Across the Atlantic, US chipmakers mirrored this frenetic demand. Shares in Sandisk rocketed by 780% in 2026 alone, building on an astonishing 4,510% gain over the last 12 months. Western Digital gained 240%, Micron was up 296%, and Seagate rose 226%, all within the first half of the year. Dan Coatsworth, head of markets at AJ Bell, noted these were "the kind of gains in six months you might normally expect over decades with investing," attributing this to "demand exceeding constrained supply [that] led to a surge in memory chip prices and took suppliers’ shares on a spectacular ride upwards."

**The AI Cost-Push and Geopolitical Undertones**

The ripple effects of this chip scarcity were not confined to stock market balance sheets. Apple, for example, explicitly blamed the increased cost of memory chips for price hikes on its iPad and MacBook products last week. More critically, the company is reportedly seeking clearance from the Trump administration to purchase memory chips from CXMT, a Chinese firm blacklisted by the Pentagon. This development highlights how critical hardware supply chains are increasingly intertwined with high-stakes geopolitical policy.

**The Frenzy Fades: A Shift in Investor Sentiment**

Despite the dizzying ascent, recent days have shown distinct signs that the chip stock boom may be faltering. Some investors have grown wary, "balk[ing] at the huge spending plans announced by leading AI companies," recognizing that such capital expenditure will lead to higher borrowing and strain cashflow, rendering these businesses more capital-intensive. As a result, capital has begun rotating out of tech and into other sectors.

Chris Beauchamp, chief market analyst at IG, observed a "desire to protect profits" after investors had "piled in to AI and tech since the end of March," leading to a mood where investors "sell first and ask questions later." This cooling sentiment, juxtaposed against a generally strong first half of 2026 where Japan’s Nikkei climbed 38% and the UK’s FTSE 100 gained 5.8% (despite the Iran war impacting share prices), suggests the chip sector's extreme volatility is now being met with a dose of market realism.

In essence, the first half of 2026 underscored the immense power of AI to reshape market dynamics, driving unprecedented profits for its foundational hardware providers. Yet, the recent rotation out of tech and the cautious investor sentiment signal an inevitable shift from pure euphoria to a more discerning evaluation of the long-term sustainability and capital demands of the AI gold rush.