The Iran war is squeezing the companies that build the hardware behind the AI boom, with chipmakers and suppliers warning that supply chains, energy costs and profitability are all under pressure as the conflict in the Middle East drags on. While investors kept cheering AI stocks, the people and firms at the bottom of the production chain are dealing with shortages, rerouted shipments and rising costs that ripple through the entire tech apparatus.
Who Pays for the Standoff
Francisco Jeronimo, analyst at IDC, said, "We can expect further negative impact this year...the price of gas, energy and freight are at an all-time high and are likely to remain high for a few more quarters, even if the situation de-escalates," and added, "Even with a potential ceasefire, the supply-side damage doesn't improve overnight." That is the basic hierarchy of the moment: geopolitical brinkmanship at the top, and higher costs, tighter margins and disrupted logistics for everyone downstream.
TSMC, which manufactures Nvidia chips, said the situation in the Middle East could impact its profitability, with prices for certain chemicals and gases likely to increase. Foxconn, the world's largest contract electronics manufacturer, singled out events in the Middle East as a key challenge this year. Chipmaker Infineon said costs would rise for precious metals, energy and freight as a result of the war. The AI rally may still be inflating stock prices, but the companies actually making the hardware are warning that the bill is coming due.
Supply chain disruption and energy costs are two areas of concern for chip companies amid the Iran war. Helium, which is mainly produced as a by-product of natural gas production, is crucial to semiconductor manufacturing. Qatar, the world's second-largest supplier which owns part of the world's largest gas field, has seen its export capacity hamstrung by Iranian strikes. Qatar provided over 30% of the market in 2025, according to S&P Global. Access to other materials crucial to the semiconductor manufacturing process, such as bromine and aluminium, have also been impacted. In March, chip buyers in Europe were paying more and tapping backup stores as the war disrupted air freight.
The Hardware Behind the Hype
The AI boom keeps serving as a cushion for investor confidence, even as the underlying industrial chain gets battered. Michael Field, chief equity strategist at Morningstar, said, "Any disruption so far has been completely overshadowed by the upswing in investor confidence in AI," pointing to big gains in recent weeks from chip companies. Nasdaq's PHLX Semiconductor Sector Index — comprising the 30 largest U.S.-traded chip companies — has risen 41% over the past three months.
But the companies themselves are already adjusting to the pressure. Jeronimo said chip companies understand they need to diversify to be less dependent on a specific region. From a short-term perspective, TSMC is building inventory buffers and diversifying sourcing, he added. TSMC Chief Financial Officer Wendell Huang said on an earnings call in April that the Taiwanese chipmaker's strategy was "to continuously develop multi-source supply solutions to build a well-diversified global supplier base and to improve the local supply chain." That is the language of corporate survival: more buffers, more sourcing, more insulation for the firms with enough leverage to buy it.
VAT Group, which supplies components to chipmakers, said it experienced supply chain disruption and had to reroute shipments of goods to customers as a result of the war. While the company said it expected no material impact on its 2026 full-year outlook, sales for its first quarter took a hit of 20-25 million Swiss francs ($25.5 million to $32 million), the company reported. Even the suppliers feeding the chip machine are being forced to absorb the shock.
What the Market Calls Resilience
Rising energy costs are currently a "most acute" problem for manufacturers and fabs, Sebastien Naji, analyst at William Blair, told CNBC. But the longer the conflict in the Middle East lasts, the "more significant the second and third order impacts on component costs, vendor margins and overall AI data center economics," he added. The costs do not vanish; they get passed along, absorbed, or delayed until the next earnings call.
As of Monday, there were no signs that the U.S. and Iran were any closer to reaching a deal as U.S. President Donald Trump ramped up threats to Tehran on Sunday. Japanese semiconductor testing equipment maker Advantest said in its earnings that the "business environment surrounding the company remains unpredictable" due to "concerns of escalating tensions in the Middle East potentially leading to a slowdown in the global economy." While the direct impact on earnings was currently limited, the company said, certain costs, including in logistics, had already arisen, and supply chain shortages could emerge.
If the blockade continues through the summer, Naji said, "we are more likely to revisit the risks and impacts in future earnings periods." Jeronimo said, "The companies that will be insulated [against impacts from the Iran war] are the ones with safety stock, diversified sourcing and pricing power on manufacturing capacity." He added, "Everyone else will be under increasing cost pressure for the rest of 2026." In other words, the firms with the most power can buy a buffer; the rest get the squeeze.