The AI rally has continued this earnings season. But companies that make the basic hardware powering the boom have warned that the war in Iran is putting pressure on their supply chains and profits.
The ongoing conflict in the Middle East has seen oil prices rise and supply chains are critical for the technology sector. Shortages of key chipmaking materials, including helium, are expected as the US and Iran remain closed.
TSMCproductive Nvidia chips, said the situation in the Middle East could affect its profits, as the prices of certain chemicals and gases may increase. Foxconnthe world’s largest electronic contract manufacturer, has singled out events in the Middle East as a major challenge this year. A chip maker Infineon He said that the cost of precious metals, energy and goods will increase because of the war.
The situation for companies could get worse, Francisco Jeronimo, an analyst at IDC, told CNBC.
“We can expect another negative impact this year…prices of gas, energy and materials are very high and are likely to remain high in several other sectors, even if the situation eases,” he said. “Even when there may be a ceasefire, supply-side damage doesn’t develop overnight.”
Rising costs
Supply chain disruptions and energy costs are two areas of concern for chip companies amid the Iran war.
Helium, which is produced mainly as a byproduct of natural gas production, is important in the production of semiconductors. Qatar, the world’s second-largest gas supplier with half of the world’s largest natural gas reserves, has seen its export capacity cut short by Iranian strikes. Qatar will account for more than 30% of the market by 2025, according to S&P Global.
Access to other materials important to the semiconductor manufacturing process, such as bromine and aluminum, also had an impact. In March, chip buyers in Europe were overpaying and hitting spare shops as the war disrupted air transport.
The chip companies “all understand that they need to diversify so that they don’t become localized,” Jeronimo said. From a short-term perspective, TSMC is building inventory buffers and diversifying sourcing, he added.
The Taiwanese manufacturer’s strategy was to continue to develop multi-sourcing solutions to build a diversified global supplier base and improve its geographic supply chain,” said Chief Financial Officer Wendell Huang on an April earnings call.
VAT groupwhich supplies components to chipmakers, said it had experienced supply disruptions and had to reroute shipments to customers because of the war. While the company said it does not expect a material impact on its full-year 2026 outlook, its first-quarter sales took 20-25 million Swiss francs ($25.5 million to $32 million), the company reported.
Long-term anxiety about conflicts
Rising energy costs are currently a “very difficult” problem for manufacturers and textiles, Sebastien Naji, an analyst at William Blair, told CNBC.
But if the conflict continues long in the Middle East, “the most important second- and third-order effect is on component costs, vendor margins and the overall economics of the AI data center,” he added.
The supply chain impacts and rising costs revealed this season for the company’s earnings may just mark the beginning of storms should the US-Iran situation continue to play out.
“If the blockade continues through the summer, there is a high probability that we will again look at the risk and the impact on future earnings periods,” said Naji.
As of Monday, there were no signs that the US and Iran were close to reaching a deal as US President Donald Trump escalated threats to Tehran on Sunday.
Japanese semiconductor test equipment manufacturer Advantest he said in earnings that “the business environment around the company remains unpredictable” due to “concerns about the escalation of conflicts in the Middle East that could lead to a global economic downturn.”
Although the direct impact on earnings was currently limited, the company said, some costs, including transportation, were already occurring, and supply chain shortages may arise.
But so far, with the AI boom undermining any investor caution, stocks continue to rally.
“Any disruption so far has completely overshadowed investor confidence in AI,” Michael Field, chief equity strategist at Morningstar, told CNBC, pointing to big gains in recent weeks from chip companies.
The Nasdaq’s PHHLX Semiconductor Sector Index – which includes 30 major US-traded chip companies – is up 41% in the past three months.
Shares of the Philadelphia SE Semiconductor Index over the past three months.
“Companies that will be closed [against impacts from the Iran war] they are the ones that have safety shares, diverse availability and price power in terms of production capacity,” said Jeronimo.
“Everyone else will be under increasing cost pressure until the end of 2026.”
