Indiana Trust Wealth Management
Investment Advisory Services
by Clayton T. Bill, CFA
Vice President, Director of Investment Advisory Services

  • The U.S. equity market, represented by the S&P 500 index, rose 1.4% this week.
  • “Capital discipline” is the new mantra from semiconductor firms. If that remains the case, the current semiconductor boom may last longer than conventional wisdom suggests.

The semiconductor sector of the stock market has been on fire. Over the last year, the sector has returned about 150%. Micron, a memory chip manufacturer, reached $1 trillion in market cap this week. The production of semiconductors is an incredibly complex process. To your author, that they exist at all is somewhat miraculous.

Historically, the industry has been prone to boom-and-bust cycles. Overexpansion during times of high semiconductor prices led to many tears shed by semiconductor investors when demand subsequently cratered and prices fell. The conventional wisdom is that the semiconductor industry is in another one of its typical bubbles, going through yet another boom-bust cycle.

Gregor MacDonald, an energy and markets analyst, noted this week that semiconductor firms may have finally learned these lessons. Chip makers are now outwardly vocal about a strategy of capital discipline while AI-driven demand for their products has exploded.

The CEO of Micron, Sanjay Mehrotra, freely acknowledged this approach in an interview. He stated that the firm is meeting about 50% of current demand. Micron is taking its time on expanding capacity as they look to avoid previous episodes of memory chip oversupply. “We expect this shortage (relative to demand) to persist for quite some time, extending well beyond 2026,” Mehrotra said.

Micron’s stock has flown because of this supply / demand mismatch, up 225% this year. Yet shockingly, Micron’s price-to-earnings ratio has fallen as the company’s earnings growth estimates have risen faster than the stock price. As a result, Micron trades at a rather “cheap” multiple of 10x forward earnings.


Source: Bespoke Investment Group, May 27, 2026

Taking capital discipline by AI suppliers into account, Mr. MacDonald concludes that the AI buildout may be constrained, thus extending the current cycle further. Perhaps this will end up as a longer cycle for semis than conventional wisdom suggests.

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