Technology stocks fall without changing the AI trend! UBS said the pullback may be temporary: the global semiconductor market is expected to reach $24 trillion by 2027, and storage chips will be the main drivers.

In the past few trading days, concerns about the overheating of the AI market, combined with the uncertainty of the macro environment (including the ongoing stalemate in the Middle East GEO Group Inc situation, strong US non-farm payroll data boosting expectations of a Fed rate hike, etc.), have led to a pullback in global semiconductor stocks. However, UBS Group AG has provided a positive outlook for the global semiconductor industry in a recent research report. The bank predicts that global semiconductor industry channel shipment revenue will grow by 118% to $1.62 trillion in 2026 and further increase by 46% to $2.38 trillion in 2027. Global semiconductor industry revenue continues to rise, with storage chips leading the way UBS Group AG points out that a key driver of the significant growth of the global semiconductor industry is storage chips. The bank predicts that storage chip revenue will grow by 318% to $961 billion in 2026 and further increase by 70% to $1.638 trillion in 2027. The bank also notes that Agentic AI (Agent-Based Artificial Intelligence) is a key "engine" driving not only the growth of High Bandwidth Memory (HBM) demand but also DDR5/LPDDR5 and NAND flash memory demand. At the same time, there is also significant growth in server CPU demand, including traditional server CPUs and AI server main node CPUs. UBS Group AG predicts that overall CPU revenue will grow by 25% to $75 billion in 2026 and by 28% to $96 billion in 2027even though the PC market continues to show weakness. In addition to CPUs, UBS Group AG also predicts that CMOS logic chip revenue (excluding storage value) will grow by 43% in 2026 and 8% in 2027; analog chips and MCUs (Microcontrollers) are expected to achieve double-digit percentage growth in both 2026 and 2027. In summary, AI is driving a widespread and comprehensive increase in semiconductor revenue, and this trend may continue for some time. Year-on-year growth rate of semiconductor revenue expected to fall from peak levels UBS Group AG points out that according to traditional cyclical indicators, the global semiconductor market may be approaching the high point of this cycle. The bank predicts that the year-on-year growth rate of global semiconductor industry 3-month moving average (3MMA) revenue will peak at 135% in October 2026. Although a slowdown in growth is almost inevitable afterwards, the industry revenue year-on-year growth rate is still expected to remain at 30% in December 2027. The bank adds that the year-on-year growth rate of 3MMA revenue excluding storage chips is expected to peak in September 2026 at 35% and fall to 6% by October 2027. This also indirectly reflects the significant driving force of storage chips on the semiconductor industry. On the other hand, other leading cyclical indicators are still in "green light mode": wafer foundry capacity utilization will continue to improve until the third quarter of 2027; packaging equipment revenue growth rate will continue to improve until the fourth quarter of 2027; storage industry operating profit will continue to improve until the fourth quarter of 2027. Upside risks from AI not only come from AI accelerators and HBM, but also from CPUs, DRAM, NAND, and related network equipment and power management demand, all of which may further delay the turning point of the industry cycle. Inventory levels are rising but overall manageable UBS Group AG points out that as of the end of March/April quarter 2026, the average inventory days of non-storage semiconductor manufacturers reached 166 days, an increase of 9 days compared to the previous quarter and a decrease of 5 days year-on-year; OEM manufacturers' average inventory days reached 100 days, an increase of 12 days compared to the previous quarter and an increase of 3 days year-on-year. Overall, the bank did not see widespread signs of inventory build-up. Due to industries more vulnerable to storage chip shortages (such as smartphones and PCs) adjusting their production plans early in the year, overall inventory remains within manageable levels. Pullback may be temporary Based on a positive outlook for the global semiconductor industry, UBS Group AG believes that the recent pullback in semiconductor stocks may be temporary. The bank believes that the storage sector still looks promising, and the WFE (Wafer Fabrication Equipment) sector has room for upside relative to the storage sector; the bank prefers AI logic chip companies but is relatively cautious on the analog chip sector. In the US stock market, UBS Group AG's preferred semiconductor stocks include Applied Materials (AMAT.US), Micron Technology, Inc. (MU.US), and Texas Instruments Incorporated (TXN.US), while the least preferred semiconductor stocks include ON Semiconductor Corporation (ON.US) and Qualcomm (QCOM.US).