AI’s rise continued this earnings season. But companies that build the underlying hardware driving the boom warned that the Iran war is straining their supply chains and profitability.
Escalating conflict in the Middle East has sent oil prices soaring and crippled key supply chains for the tech industry. With the US and Iran still at loggerheads, shortages of key chip-making materials, including helium, are expected.
TSMCmanufacture Nvidia The company said the situation in the Middle East could impact its profitability and could result in higher prices for certain chemicals and gases. foxconnThe world’s largest contract electronics manufacturer has cited events in the Middle East as a key challenge this year. chip manufacturer infineon He said the cost of precious metals, energy and cargo would rise as a result of the war.
IDC analyst Francisco Geronimo told CNBC that the situation for companies could get even worse.
“We expect further negative impacts this year. Gas, energy and freight prices are at record highs and are likely to remain high for several more quarters even if the situation subsides,” he said. “Even with the possibility of a ceasefire, the damage on the supply side will not be reversed overnight.”
rising costs
Supply chain disruptions and energy costs are two areas of concern for semiconductor companies during the Iran war.
Helium is primarily produced as a byproduct of natural gas production and is essential for semiconductor manufacturing. Qatar, which owns some of the world’s largest gas fields and is the world’s second-largest supplier, has had its export capacity hampered by Iranian attacks. According to S&P Global, Qatar accounted for more than 30% of the market in 2025.
Access to other materials essential to semiconductor manufacturing processes, such as bromine and aluminum, has also been affected. In March, European chip buyers were paying more and using reserve stores as the war disrupted air transport.
“All semiconductor companies understand that they need to diversify to become less dependent on one region,” Geronimo said. From a short-term perspective, TSMC is building inventory buffers and diversifying its procurement, he added.
The Taiwanese semiconductor maker’s strategy is to “continually develop multi-source supply solutions to build a diversified global supplier base and improve the local supply chain,” Chief Financial Officer Wendell Huang said in an April earnings call.
VAT groupThe company, which supplies parts to semiconductor manufacturers, said it had suffered supply chain disruptions due to the war and had to reroute goods to customers. The company reported that first-quarter sales took a hit of 20 million to 25 million Swiss francs ($25.5 million to $32 million), although it does not expect any material impact on its full-year 2026 outlook.
Concerns about protracted conflict
William Blair analyst Sebastian Nagy told CNBC that rising energy costs are currently the “most serious” problem for manufacturers and factories.
But the longer the conflict in the Middle East drags on, he added, “the greater the second- and third-order effects on component costs, vendor profits, and the overall economics of AI data centers.”
The supply chain impacts and rising costs revealed this earnings season could be just the beginning of headwinds if the US-Iran standoff continues.
“If the lockdown continues into the summer, we will be more likely to reconsider the risks and impacts in future financial results periods,” Nagy said.
As of Monday, there were no signs that the U.S. and Iran were moving closer to a deal, even as U.S. President Donald Trump stepped up his threats against Iran on Sunday.
Japanese semiconductor inspection equipment manufacturer Advantest stated in its financial results that “the business environment surrounding our company remains unpredictable” due to “concerns that escalating tensions in the Middle East may lead to a slowdown in the global economy.”
The company said that while the direct impact on revenue is currently limited, certain costs, including logistics, have already been incurred and could result in supply chain shortages.
But for now, the AI boom has calmed investors’ wariness, and stocks continue to rise.
“Any disruption to date has been completely overshadowed by the rise in investor confidence in AI,” Michael Field, chief equity strategist at Morningstar, told CNBC, pointing to strong gains in recent weeks for semiconductor companies.
Nasdaq’s PHLX Semiconductor Sector Index The company, which is made up of the 30 largest U.S.-listed semiconductor companies, is up 41% in the past three months.
Philadelphia SE Semiconductor Index stock prices over the past three months.
“The companies that will be insulated[from the impact of the Iran war]are those that have safety stocks, diversified sourcing, and pricing power over manufacturing capabilities,” Geronimo said.
“All other companies will be under additional cost pressure for the remainder of 2026.”
