The discourse surrounding semiconductors has mostly adhered to a well-known script for the last two years. Nvidia, GPUs, hyperscaler spending, and Microsoft, Google, Amazon, and Meta’s bewildering capital expenditure plans. Almost every other story in the industry was engulfed by the narrative, which had a sort of gravitational pull. Nevertheless, something more subdued has been taking place next to that extremely noisy trade. The manufacturers of power and analog chips, whose products are hardly known outside of engineering circles, have begun to move in a direction that seems more like a turn than a coincidence.
Microchip Technology, ON Semiconductor, Texas Instruments, and Analog Devices. stocks that were abandoned during the protracted cycle of industrial destocking. The price action is not subtle, and they have abruptly returned. In just three months, ON Semiconductor has increased by about 60%. Following its first-quarter report, Texas Instruments reported its best single-session move since 2000, a fact that is somewhat ambiguous because 2000 is not a year that semiconductor investors typically bring up casually. Beneath the surface of the market, there is a feeling that something genuine is reuniting.
This rally is intriguing because it blatantly connects the two worlds. Chips used in EV powertrains and factory robotics are manufactured by the same companies, sometimes on the same fabrication lines, as power-management chips that control voltage inside a server rack. The management of ON Semiconductor described a halo effect that simultaneously affects industrial buyers in Stuttgart and automotive customers in Shenzhen when they stated that AI data-center revenue increased more than 30% sequentially and is predicted to double this year. The distinction between “industrial chip” and “AI chip” is becoming more hazy than the headlines indicate.
You can hear the relief in any conversation you have right now with auto suppliers. ON’s automotive revenue decreased for seven consecutive quarters. Stockpiles accumulated. Automakers withdrew their orders. The cycle then let out a breath, almost on schedule. Revenue from automobiles started to rise again. Approximately 55% of the new EV models on display at the 2026 Beijing Auto Show had silicon carbide content, the type used in electric powertrains. Even accounting for some marketing zeal incorporated into auto-show statistics, that is an impressive figure.
The cycle turn felt almost official thanks to Texas Instruments‘ results. Every region, every customer size, and every end market saw a sequential increase in industrial revenue of more than 30% year over year. What was important was that breadth. This cycle’s prior rebounds had a stop-start nature, with weakness in one region offsetting an uneven recovery in another. This time, it was more difficult to claim the rebound was statistical noise due to its breadth. Although it’s still unclear if the recovery will continue at its current pace into the second half of the year, investors appear to think the destocking pain is truly behind them.
As this develops, it seems like the market is adding two stories to the same trunk. Analog chips are necessary for the development of AI infrastructure and for the industrial economy to emerge from hibernation. It so happens that the same businesses serve both. It’s difficult to ignore how well that arrangement works for brands that were just months ago in the bargain bin.
Dangers persist. The demand for cars in Europe is still slow. Even though hyperscaler capex commitments are enormous, the question of whether returns will eventually outweigh the expenditure remains unanswered. Even optimistic analysts are concerned about the volatility of memory chip pricing. Furthermore, too many people have been humbled by the semiconductor cycle for any sober observer to declare victory.
However, the chip rally feels more expansive than its headlines for the first time in a long time. The data center rack and the industrial floor are pulling in the same direction. That in and of itself merits attention.
