Geopolitical Tensions in Strait of Hormuz Threaten AI Chip Supply Chain

The production of the world's most advanced semiconductors is facing a critical bottleneck as geopolitical instability in the Middle East disrupts the supply of helium. Approximately 30% of global helium production is currently offline or inaccessible due to conflict in the Strait of Hormuz, a vital transit point for the gas. Helium is an indispensable component of the Extreme Ultraviolet (EUV) lithography process used to create 2-nanometer and 3-nanometer chips. Because East Asian fabrication plants rely heavily on Middle Eastern supplies, the disruption threatens the output of the industry's most critical hardware, which serves as the backbone for the current AI expansion. Taiwan Semiconductor Manufacturing Co. (TSMC) is particularly exposed, with advanced chips accounting for over 60% of its total revenue. Despite strong financial performance in Q1 2026—reporting a 35% increase in revenue and a 65% surge in net income—the company's high valuation may be vulnerable to any hit in actual production volumes. Micron Technology faces similar challenges due to its reliance on Asian facilities that source helium from the affected region. While Micron saw a 123% year-on-year revenue increase for the first half of fiscal 2026, the cyclical nature of the memory chip business makes its stock price susceptible to rapid declines if supply issues persist. Nvidia, while not a manufacturer, remains highly dependent on TSMC's ability to deliver advanced silicon. Analysts suggest a cautious approach to AI-related equities until the conflict subsides, as the potential for increased raw material costs and reduced chip yields could lead to a valuation reset for the sector.