The ongoing conflict between the conflict between the U.S.-Israeli alliance and Iran has threatened the global economy in many ways, and it has also brought to the fore the previously under-reported vulnerabilities of the semiconductor industry and the AI industry in general.
For starters, supply chains were massively disrupted when the war broke out. For example, Iranian attacks on the industrial complex in Ras Laffan, Qatar, disrupted helium supplies and caused prices to more than double since almost 33% of all the helium is produced at this complex. Semiconductor fabs require this gas for their operations, and soaring prices and reduced supply put semiconductor production at risk.
Additionally, Iran attacked data centers owned by Amazon Web Services in Bahrain and the United Arab Emirates at the start of March 2026. Such attacks were a first, and the Iranians justified their actions by explaining that the U.S. and Israel were using cloud infrastructure to obtain targeting data, so commercial data centers effectively became legitimate military targets. This unprecedented action has put these AI facilities in the crosshairs during conflicts, and that is a major vulnerability of the industry.
Gulf countries and several other countries have depended on security guarantees provided by the U.S. for decades. However, the ongoing conflict has exposed the limits of these security guarantees. For instance, several countries in the Gulf, such as Saudi Arabia, Qatar, Kuwait and others have been attacked by Iran because they host U.S. military bases that were used to launch attacks against Iran. These countries are beginning to question whether an alliance with the U.S. is worthwhile or presents a far bigger risk.
The U.S. also moved missile defense systems from South Korea and repositioned them in the Gulf as it waged its war. Taiwan is constantly living under the threat of being attacked by China, and it is wondering whether the U.S. will really protect it or whether it should look elsewhere.
Taiwan is especially crucial in the semiconductor industry because one firm on its soil, Taiwan Semiconductor Manufacturing Co. Ltd, makes about 90% of all advanced semiconductor products used in the AI industry. If war were to break out in Taiwan, the global AI industry would grind to a halt because the other contract manufacturers cannot match or replace what TSMC produces.
This war has really exposed the underbelly of the AI industry, and it is now up to leading entities like Broadcom Inc. (NASDAQ: AVGO) that also make semiconductor products to capitalize on the vulnerabilities that have been brought to light and design workarounds that strengthen their market positions.
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