Semiconductor stocks benefited from healthy demand trends in the second quarter of 2026, supported by higher 5G deployments and continued fiber network expansion. Despite a challenging macroeconomic backdrop marked by geopolitical tensions, trade disputes and tariff-related uncertainties, the industry remained resilient, aided by robust demand for scalable connectivity infrastructure and the rapid proliferation of Internet of Things (IoT) devices.
Monthly data from the Semiconductor Industry Association (“SIA”) reflected this momentum. Global semiconductor sales surged 11% sequentially to $110.5 billion in April 2026 and increased another 9.2% to $120.6 billion in May, highlighting sustained end-market demand across communications, enterprise and AI-driven applications.
As the core building blocks of telecommunications equipment, consumer electronics, data centers and connected devices, semiconductor chips continue to benefit from ongoing investments in next-generation network infrastructure. Increased carrier spending on 5G deployment and fiber expansion, particularly in underserved regions, has strengthened the industry's long-term growth outlook. The transition from traditional network architectures to software-defined, demand-driven networks featuring greater programmability and automation has provided an additional growth catalyst.
Factors Driving Industry Growth
Robust 5G Deployment and Fiber Expansion
The rapid rollout of 5G networks continues to fuel demand for semiconductor solutions by enabling high-speed, low-latency connectivity for bandwidth-intensive applications. Beyond faster mobile broadband, 5G is expected to accelerate the adoption of connected vehicles, augmented and virtual reality, smart cities, industrial automation and other next-generation IoT applications.
At the same time, telecom operators continue to expand fiber-optic networks to support both wireless and wireline broadband services. Fiber remains the backbone of 5G infrastructure, providing high-capacity backhaul and last-mile connectivity while supporting the growing deployment of small cells needed to enhance network capacity and coverage.
Cloud Adoption and AI Infrastructure Investments
The ongoing migration toward cloud-native and converged network architectures is creating additional opportunities for semiconductor suppliers. As service providers integrate voice, video and data services over unified platforms, demand is rising for programmable networking solutions and software-driven communications infrastructure.
The rapid adoption of cloud computing, enterprise AI applications and generative AI workloads is also driving significant investments in data center infrastructure. Growing demand for high-performance routers, switches, optical networking equipment, edge computing platforms, servers and storage systems continues to support semiconductor consumption. The expanding deployment of connected devices and rising demand for electronics testing equipment and power management solutions further reinforce industry growth prospects.
Adoption of Advanced Networking Technologies
The industry is also benefiting from increasing adoption of advanced technologies, including DOCSIS, Digital Subscriber Line and next-generation Passive Optical Network platforms, all of which require increasingly sophisticated semiconductor content.
In addition, growing demand for network-based video processing, transcoding, compression, storage technologies and advanced home gateway solutions is expanding semiconductor usage across residential, enterprise and service provider markets. These trends, coupled with continued investments in next-generation broadband infrastructure, are expected to remain key drivers of long-term industry growth.
How to Pick?
A multitude of semiconductor stocks is likely to report earnings in the coming weeks. A solid earnings performance of the technology sector could sow the seeds for future investments and R&D as the industry seeks to capitalize on the inherent growth potential.
Among a diverse range of companies, choosing the right stock for your portfolio could be challenging. While it is impossible to be sure about such outperformers, our proprietary methodology makes the process fairly simple.
Our research shows that for companies with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), chances of an earnings surprise are as high as 70%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP is an important ingredient of our proven model, which, along with a top Zacks Rank, creates the perfect combination to determine stocks with the best chances to pull off a surprise in the upcoming earnings announcements. It is the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate.
Potential Winners
Applied Materials, Inc. AMAT: Headquartered in Santa Clara, CA, Applied Materials is a leading supplier of equipment used to manufacture semiconductor devices, flat panel displays and solar photovoltaic products. The company also provides deployment and support services for the tools it installs at customer fabs. Applied Materials’ semiconductor equipment portfolio supports front-end operations in the chipmaking process. These steps involve the deposition or implantation of multiple thin layers of electronically conductive, semiconductive and insulating materials onto and within a silicon wafer, using photomasks to create multiple copies of integrated circuit devices.
Applied Materials is witnessing increased AI adoption, which is pushing wafer fab equipment spending toward leading-edge foundry-logic, DRAM and advanced packaging. Management expects these three areas to drive more than 80% of year-over-year total WFE growth in calendar 2026, with a similar profile in 2027. The company expects its semiconductor equipment business to grow more than 30% in calendar 2026 as customers expand cleanroom capacity and accelerate equipment pull-ins. Applied Materials currently has a Zacks Rank #2 and an Earnings ESP of +1.52%. The company is scheduled to report results after the closing bell on Aug. 13.
Monolithic Power Systems, Inc. MPWR: Based in Kirkland, WA, Monolithic designs, develops and markets high-performance power solutions. The company focuses on the market for high-performance analog and mixed-signal integrated circuits (ICs). Its products are widely used in industrial applications, telecommunications infrastructure, cloud computing and automotive and consumer applications.
Monolithic continues to benefit from rising demand for power management solutions tied to AI infrastructure and cloud computing deployments. The company continues to differentiate itself through proprietary process technologies and high power-density solutions. Unlike many fabless peers, the company installs proprietary process technologies within third-party manufacturing facilities, allowing tighter control over integration and product performance. Management highlighted that its indigenous architecture enables single-piece silicon solutions versus multi-chip competitor approaches in AI and high-density applications. Its geographically diversified supply-chain strategy should support customer demand while improving supply flexibility amid evolving trade conditions.
This Zacks Rank #2 firm has an Earnings ESP of +1.00%. The company is scheduled to report results after the closing bell on July 30.
Silicon Motion Technology Corporation SIMO: Based in Hong Kong, Silicon Motion is a leading developer of microcontroller ICs for NAND flash storage devices. The semiconductor company designs, develops and markets high-performance, low-power semiconductor solutions for original equipment manufacturers and other customers. Mobile storage remains its core focus, while its other offerings include embedded memory controllers, SSD controllers and solutions, flash memory card controllers, and USB flash drive controllers.
Silicon Motion is increasingly penetrating enterprise and AI infrastructure markets through MonTitan controllers and boot drive solutions. In first-quarter fiscal 2026, MonTitan began production with two customers, with five additional major cloud service providers expected to ramp later in the year. The company is benefiting from the transition to higher-performance PCIe Gen5 controllers, which carry higher average selling prices and stronger margin potential.
Silicon Motion has an Earnings ESP of +7.68%. The company is scheduled to report results on July 29. Silicon Motion sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
