Key Takeaways:
The AI investment cycle has room to run, with supply bottlenecks shifting from hyperscalers to smaller component makers and China's memory sector poised for a landmark IPO, according to Nomura.
Nomura raised its 2026 global AI server revenue forecast by 12%, citing stronger-than-expected demand and higher average selling prices, as the bank argued the current selloff in AI stocks represents a healthy correction rather than a cycle peak.
"The recent pullback in AI-related stocks is healthy — the market needs to digest risks," said David Teng, Greater China semiconductor and technology analyst at Nomura. "We do not believe the cycle has reached its peak, as hyperscaler capital expenditure may increase further and extend into next year."
The upward revision comes as AI infrastructure spending continues to accelerate. Teng noted that supply-side bottlenecks are likely to shift from large technology companies to smaller component, equipment and material manufacturers, broadening the investment opportunity set. Price increases and sustained earnings upgrades remain the biggest catalysts, he said, with the bank recommending buying on weakness.
China's AI Value Chain Has 'Great Upside Potential'
Duan Bing, Nomura's China technology and telecommunications analyst, said China's AI value chain still has significant room for growth as domestic AI investment lags the global market. Improvements in China's AI chip supply, combined with increased spending from large technology and internet companies, could support earnings and margin expansion in the second half of 2026 and into 2027, he said.
The analysts expressed particular optimism about ChangXin Memory Technologies (CXMT), the Chinese DRAM maker scheduled to list on the Shanghai Stock Exchange's STAR Market on July 27. Teng described CXMT as potentially "one of the greatest stocks ever listed in China" and said it would be a major beneficiary of the current memory chip supply tightness, which he characterized as "unprecedented" in the current cycle.
CXMT's listing comes at a time when memory chip supply is constrained across the industry. The company, which produces DRAM chips used in servers, smartphones and AI accelerators, could use the IPO proceeds to expand market share during the shortage, Teng said.
Investment Implications
For investors, Nomura's thesis suggests the AI trade still has legs despite the recent volatility. The 12% upward revision to server revenue forecasts implies continued strength for Nvidia, AMD and their supply chain partners, while CXMT's IPO opens a new avenue for China AI exposure. The shift in supply bottlenecks from hyperscalers to smaller component makers also suggests that companies in the equipment and materials segment — including firms supplying TSMC, Samsung Foundry and memory manufacturers — could see increased pricing power and order momentum through 2027.
The key risk to the cycle remains a sudden pullback in hyperscaler capital expenditure, though Nomura's analysis suggests that scenario is unlikely in the near term given the pre-sold nature of current data center builds.
This article is for informational purposes only and does not constitute investment advice.
