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Has the semiconductor cycle changed?

July 29, 2026

The recent momentum unwind has put semiconductors and the broader artificial intelligence (AI) trade under increased scrutiny, even as earnings expectations remain exceptionally strong. For a group that has historically been highly cyclical, investors appear increasingly focused on whether earnings are approaching a peak or simply transitioning to a more moderate pace of growth. Despite recent price weakness, forward earnings estimates continue to trend higher, reflecting expectations that demand for compute capacity will remain robust. "We may not be on the precipice of a cyclical peak, but rather a moderation in the growth rate that stabilizes at a much higher plateau than currently discounted," says Garrett Melson, CFA®, Portfolio Strategist at Natixis Investment Managers Solutions.

  • Forward earnings estimates for semiconductor and memory companies have increased more than 70% since the start of the year, representing some of the largest upward revisions across the market.

  • Concerns that hyperscalers may slow AI-related capital spending have fueled fears that the industry is nearing a cyclical peak.

  • If upcoming earnings reports confirm that compute capacity remains constrained, both earnings expectations and share prices could have room to rebound from recent oversold levels.

CFA® and Chartered Financial Analyst® are registered trademarks owned by the CFA Institute.

This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of Natixis Investment Managers, or any of its affiliates. The views and opinions expressed may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted, and actual results may vary.

All investing involves risk, including the risk of loss. Investment risk exists with equity, fixed income, and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided. Investors should fully understand the risks associated with any investment prior to investing.

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