The artificial intelligence stock rally keeps moving higher this earnings season. However, the companies building the physical hardware for this technology face serious problems. A growing war between the United States and Iran in the Middle East is pushing oil prices to record highs. This conflict damages critical technology supply chains and threatens the future profits of major chipmakers.
Taiwan Semiconductor Manufacturing Company, the firm that builds chips for Nvidia, told investors the Middle East conflict will hurt its bottom line. The company expects the prices for certain chemicals and gases to jump significantly. Foxconn, the largest contract electronics builder in the world, called the Middle East war a top challenge for the year. Chipmaker Infineon also expects to pay much more for precious metals, energy, and shipping freight.
Things will likely get worse before they get better. Francisco Jeronimo, an analyst at IDC, explained that gas, energy, and freight prices sit at an all-time high right now. He expects these costs to stay high for several more quarters. Jeronimo noted that even if the two countries agree to a ceasefire tomorrow, the supply chain damage will not heal overnight.
The war disrupts two major areas for chip companies: raw materials and basic energy costs. Semiconductor manufacturing heavily relies on helium, which companies produce as a byproduct of natural gas extraction. Qatar acts as the second-largest helium supplier on the planet and controlled over 30% of the global market in 2025. Recent Iranian military strikes severely damaged Qatar’s ability to export this vital gas.
The fighting also restricts access to other important materials like aluminum and bromine. Back in March, chip buyers across Europe paid heavy premium prices and tapped into emergency backup storage because the war halted normal air freight deliveries. Jeronimo pointed out that technology companies now understand they must diversify their sourcing. They simply cannot rely on just one specific region anymore.
TSMC Chief Financial Officer Wendell Huang spoke about this issue during an April earnings call. He stated that TSMC continues to build up its local supply chain and find multiple global suppliers to create inventory buffers. Other suppliers face immediate financial pain right now. VAT Group, a company that sells components to chipmakers, had to reroute its cargo ships because of the war. This detour cost the company between $25.5 million and $32 million in lost sales during the first quarter alone.
Rising energy costs create the most acute problem for hardware manufacturers today. Sebastien Naji, an analyst at William Blair, watches this closely. He warned that a long conflict will drastically alter the economics of building new artificial intelligence data centers. If the current sea blockade stretches through the summer months, analysts will have to drastically lower their earnings expectations for these tech companies.
A quick resolution looks highly unlikely right now. As of Monday, the United States and Iran showed no signs of reaching a diplomatic deal. Instead, US President Donald Trump escalated his rhetoric and directed new military threats toward Tehran over the weekend.
Japanese testing equipment maker Advantest added its voice to the growing chorus of concerned companies. Advantest leadership called the current business environment highly unpredictable. They fear that escalating tensions could trigger a massive slowdown in the entire global economy. While the company avoided major earnings hits so far, managers already see rising logistics costs and predict more component shortages soon.
Despite all these flashing warning signs, Wall Street simply does not care yet. The ongoing artificial intelligence boom completely cushions the market from panic. Michael Field, an equity strategist at Morningstar, explained that the massive upswing in AI investor confidence overshadows every single supply chain disruption. Buyers keep snapping up tech stocks without hesitation. For example, the Nasdaq PHLX Semiconductor Sector Index, which tracks the 30 largest chip companies in America, soared an incredible 41% over the past three months alone.
