Is the semiconductor industry headed for an almighty crash?

Chip sales grew faster year on year in the first half of 2026 than at any time since the 1980s; TSMC posted a sixth straight quarter of record profit and Samsung a fourth. Yet a leading chip index has fallen more than 10% since 6 October, and Hock Tan said on 12 October that many AI investors “have no clue”. The industry has consolidated sharply: about 25 firms could make leading-edge processors in the early 2000s, four can today, and TSMC makes nearly all high-end ones; Samsung, SK Hynix and Micron make almost all advanced memory. TSMC capex is expected at about $62bn this year and $76bn next, falling as a share of revenue and funded from cash flow. DRAM costs about six times early-2023 levels. Nvidia has committed over $250bn to secure supply to January 2029, and Micron says take-or-pay contracts lock in 35% of revenue to 2030. The Economist’s judgement is that a bust, if it comes, would be milder than the boom because consolidation and long-term contracts shift risk onto buyers—but it still expects prices, profits and share prices would fall and contracts would be renegotiated.