Where are we in this AI infrastructure investment cycle?

Investing.com -- Nomura said the AI infrastructure investment cycle has likely not yet peaked despite a recent pullback in semiconductor shares, arguing that supply constraints and hyperscaler spending trends point to further upside ahead.

Analyst Aaron Jeng told investors in a note on Tuesday that the Philadelphia Semiconductor Index (SOX) has surged 85% since the firm's last cycle update in March and 211% since Nomura revisited the AI theme in May 2025, before recently pulling back.

Jeng said "a pullback is healthy following such a surge over such a short period," pointing to risks including component supply mismatches, hyperscalers' 2027 free cash flow pressures, and macro risks tied to a rising yield trend.

Even so, Nomura said it does not believe the cycle has peaked, citing hyperscalers' spending that "may need to show upside further into 2027" despite insufficient free cash flow, driven in part by surging memory costs.

The firm's proprietary global data center build tracking also points to further upside from its March estimates.

On the supply side, Nomura said the two-year timeline for greenfield data center construction beginning in late 2025 suggests insufficient capacity heading into 2027, with the supply bottleneck likely shifting from larger players such as TSMC to smaller component makers.

Jeng added that price hikes and ongoing earnings upward revisions "would still be the biggest catalysts," adding that Nomura "would still be buyers into weakness."

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