4 Firms Now Dominate Chips: Why a Semiconductor Bust May Be Mild
Chip sales grew faster year on year in the first half of 2026 than at any time since the 1980s. Yet, as The Economist reported, this historic boom is stirring fresh unease across global financial markets over how long the expansion can last.
Chip Index Falls as AI Investor Sentiment Turns Volatile
For more than four decades, the semiconductor industry has followed two dependable rules: the density of transistors on a chip keeps rising, and every boom ultimately ends in a bust. Leading AI processors now pack more than 200 billion transistors, with manufacturers targeting a trillion by the end of the decade. Despite this technical progress, market sentiment has turned volatile. A leading chip index fell more than 10% after October 6, 2026.
Hock Tan remarked on 12 October that many artificial intelligence investors “have no clue,” while corporate commitments remain enormous. Nvidia has committed more than $250 billion to secure supply through January 2029, while Micron reported that take-or-pay contracts lock in 35% of its revenue through 2030.
Four Firms Maintain Leading-Edge Processor Manufacturing Capability
The manufacturing base has narrowed significantly over the past two decades. Around 25 firms could build leading-edge processors in the early 2000s, but only four maintain that capability today. TSMC produces nearly all high-end processors, while Samsung, SK Hynix, and Micron control almost all advanced memory production. TSMC posted its sixth quarter of record profit, with Samsung logging its fourth.
Capital expenditures remain exceptionally high to support this concentrated output. TSMC expects capital spending to reach approximately $62 billion for 2026 and $76 billion next year, funded directly from operating cash flow rather than heavy external borrowing. At the same time, cyclical memory pressures persist, with dynamic random-access memory (DRAM) costs holding at roughly six times their early-2023 levels.
While The Economist judges that any eventual market bust will likely prove milder than previous cycles, analysts anticipate that prices, profits, and share values will eventually decline as existing supply contracts are renegotiated and risk shifts downstream onto buyers.