Asia Semis & Global Memory: 3Q26 Earnings Preview - Is AI Still a Long?

Yes, we will walk into this earnings season constructively. We find AI is approaching macro "boundary conditions" and are mindful that higher borrowing cost, safety & environmental concerns, etc. may decelerate the growth of semiconductors. Nonetheless, the correction in July should have largely priced these risks in, and the strong fundamental signals & continued shortage should prompt companies to update investors positively in this earnings season. We see upside risks to our TSMC projection; 3Q26 revenue beat consensus and positive early iPhone sales is supportive for 4Q26, and the benefit of price hike will begin into 1Q27. Capital returns & LTAs should drive memory stocks up; we prefer Samsung on its HBM4 progress & lower valuation and also CXMT. MediaTek is our Top Pick. For tier-2 foundries, we turn less negative on UMC but reiterate Underperform; we're positive on Vanguard but maintain Market-Perform;