Here’s a number that will blow your mind: Data center capacity outside China could easily double next year.
Based on estimates for projects already planned or under construction, research firm SemiAnalytics just published a report projecting capacity to jump from about 25 gigawatts this year to 51 gigawatts by the end of 2027.
And that’s just outside China.
The world’s second-largest economy is on an AI-fueled building spree of its own.
Think about what that means. Data center construction has been racing ahead for years, and we’re talking about potentially doubling an already massive infrastructure base – along with all the computing power that comes with it.
Yet despite the incredible growth, Wall Street is getting cold feet.
As I wrote yesterday, investors are increasingly worried that the AI spending spree isn’t sustainable. They’re also questioning whether the massive amounts of debt being used to finance this buildout will ultimately pay off.
Just look at South Korean AI data center company Elice Inc. Its shares plunged 32% on their first day of trading, despite a 200% surge in first-half revenue this year.
That’s quite a disconnect. Demand for AI infrastructure is exploding, but investors are growing increasingly skeptical about the companies racing to meet it.
So, what’s the story? Was the brutal sell-off last week an emotional overreaction, or a sober, hard-nosed look at the math?
Let’s see what my system says.
Today, we’ll do a sector X-ray of the broader chip sector.
I ran a screen of all semiconductor equipment, services and manufacturing companies and went beyond the S&P 500 Index to include midcaps and even international stocks. I wanted the broadest collection possible of the biggest names in the AI infrastructure buildout.
Let’s jump in!
There are a lot of stocks to sift through here.
A quarter of the 92 stocks rate as “Bullish,” meaning a score of 60 or higher out of 100. (For those new to my system, “Bullish” rated stocks outperform the S&P 500 by double on average over the following year.)
About the same percentage rate as “Neutral,” and just under half rate as “Bearish.”
At first glance, this would validate Wall Street’s skepticism toward the AI trade. But 23 stocks still give us plenty to work with, so let’s keep digging.
Where Do Semiconductor Stocks Pick Up Points?
The Green Zone Power Rating system is a composite score based on six primary factors: momentum, size, volatility, value, quality and growth, each of which comprises several sub-factors.
Let’s see where these semiconductor stocks tend to rate the best.
Even after the drubbing they took last week, semiconductor stocks as a whole rate exceptionally well on momentum. About two-thirds rate as “Bullish” on their momentum factor.
They also rate exceptionally well on quality and growth, with 59 and 47, respectively, rated as “Bullish” on those factors.
It makes sense. The AI infrastructure boom is the biggest megatrend of our lifetimes, and these stocks were right in the thick of it.
It would be strange if they didn’t rate exceptionally well on momentum, quality and growth.
Alas, nothing is free.
This growth comes at a cost: higher valuations and higher volatility. Very few of the semiconductor stocks are attractively priced according to my value factor, and even fewer would be considered low-volatility stocks.
These are expensive stocks that tend to have major price swings.
Top Rated Semiconductors
Let’s look at the crème de la crème. I ranked the semiconductor stocks by their Green Zone Power Ratings and took the top 10 highest-rated.
Here’s the list:
South Korean shares have been particularly volatile of late, as the failed IPO of Elice earlier today made abundantly clear. The country, as a major hardware hub, is particularly exposed to AI infrastructure.
Yet interestingly, Samsung Electronics (SSNHZ) rates as the most “Bullish” on the list. It’s the only stock to rate as “Bullish” on momentum, volatility, value, quality and growth. And unlike most chip stocks, it rates as objectively cheap on its value factor.
Note that Samsung trades over-the-counter in the U.S., and trading volume tends to be very light, so buying shares can be somewhat difficult in an American brokerage account.
Micron Technology (MU) should be a familiar name to many of my longtime readers. We’ve held it in Infinite Momentum’s Tech Titans portfolio since June 2025 and are currently up over 620%.
One growth dynamo you may have never heard of is ACM Research (ACMR). ACMR develops and manufactures capital equipment used by foundries to make chips.
The company is headquartered in California but derives most of its revenue from sales in China’s domestic market. The stock rates a perfect 100 on growth and rates strongly on quality and momentum.
To good profits,
Adam O’Dell
Editor, What My System Says Today
