Investment bank Mizuho has outlined its key picks and risk outlook for 2026, arguing that artificial intelligence will remain the main driver of the semiconductor sector, even as overall growth moderates after a blockbuster 2025, DKNews.kz reports.
In its report titled “Semiconductors and Automotive Technology Outlook for 2026,” Mizuho said US chip stocks still offer attractive valuations, but investors should not expect a repeat of last year’s surge, when the PHLX Semiconductor Index (SOX) jumped roughly 45%.
AI Still Leads, but the Bar Is Higher
According to Mizuho, spending on AI, wafer fabrication equipment, and memory cycles should support the sector, particularly in the first half of 2026. These trends are expected to continue driving demand for AI servers and networking infrastructure, even as growth becomes more selective.
The firm emphasized that the market is entering a phase where leadership matters more than broad exposure.
Top Semiconductor Picks for 2026
Mizuho named three stocks as its top picks for 2026:
- Nvidia - seen as the primary beneficiary of sustained AI spending
- Broadcom - supported by strength in networking and infrastructure chips
- Lumentum - leveraged to optical and networking technologies tied to data centers
In addition, Mizuho highlighted Microchip Technology and Lam Research as key sector leaders, citing their strategic exposure to wafer manufacturing and long-term growth linked to AI-related capital spending.
Key Risks on the Horizon
Despite its constructive outlook, Mizuho outlined several risks that could weigh on the sector:
- a potential slowdown in AI growth in 2027
- renewed tariff or trade tensions with China
- a sluggish recovery in analog semiconductors
- high memory costs, which could pressure margins and dampen customer demand
These factors, the bank warned, could limit upside and increase volatility beyond 2026.
Qualcomm Downgraded on Smartphone Headwinds
Mizuho also turned more cautious on Qualcomm, downgrading the stock to neutral. The firm pointed to worsening conditions in the global smartphone market and loss of modem share at Apple as key challenges.
According to Mizuho, the expansion of China’s domestic component ecosystem and weakening global demand for devices are weighing on Qualcomm’s core business. The firm estimates a $2-3 billion revenue impact, assuming iPhone sales decline by about 7% in 2026.
Zillow Faces a Binary Legal Risk
Outside the semiconductor space, Mizuho downgraded Zillow Group from outperform to neutral and cut its price target to $70 from $100.
The bank cited growing uncertainty around Zillow’s access to home listings and legal risks that could affect the company’s business model, not just its valuation. An upcoming court decision related to an injunction on listing access is seen as a binary catalyst for Zillow’s shares, with potential implications for the entire real estate listings industry.
Mizuho also warned that new listing models - including exclusive listings from Compass - could further limit Zillow’s access to the full universe of homes for sale.
What It Means for Investors
Mizuho’s outlook suggests that 2026 will reward selectivity rather than broad sector exposure. AI-related infrastructure remains the strongest theme, but gains are likely to concentrate among companies closest to data centers, wafer production, and networking.
At the same time, stocks tied to consumer devices or regulatory uncertainty may face greater pressure. For investors, the message is clear - the next phase of the cycle will be about picking leaders, not chasing momentum.
