The semiconductor industry welcomes new opportunities: reshaping the chip investment landscape driven by AI

Semiconductors, known as the “brain” of electronic products, are the foundation of the global digital economy. They not only endow electronic devices with intelligent features but also serve as the core driving force in fields such as Industry 4.0, cloud computing, 5G technology, new energy, and electric vehicles. As ChatGPT sparks a wave of generative AI, the entire industry is experiencing unprecedented development opportunities.

Investment Logic Under Industry Segmentation

From vertically integrated manufacturing (IDM) to chip design (Fabless), wafer foundry (Foundry), and packaging and testing (OSAT), the semiconductor industry chain has become highly segmented. Companies in different segments have distinct characteristics:

Asset-light design companies (such as NVIDIA, Qualcomm, Broadcom) feature low operating costs and relatively controllable risks but face market volatility challenges. Wafer manufacturing companies (TSMC, GlobalFoundries) require massive capital investment and continuous technological advancement but enjoy oligopoly advantages. Equipment and materials companies (ASML, Applied Materials, Lam Research), as upstream industry players, control core technological bottlenecks and have strong cyclical resilience.

Currently, the most noteworthy market segments are chip design, wafer foundry, and semiconductor equipment—they represent the “long slope with thick snow” characteristic, making them more conducive to capturing long-term investment opportunities.

Leading Companies in the Current Market Landscape

Based on the latest market cap data as of April 2024, the global semiconductor industry exhibits the following pattern:

Design sector leaders: NVIDIA leads with a market cap of $2.19 trillion, with a 77% increase in stock price this year, driven by AI chip demand (PE 73.54). AMD has achieved a modest 7% growth, serving as a strong competitor in CPU space. Qualcomm, as the largest 5G baseband supplier, holds a 53% market share, with future applications expanding from $100 billion to $700 billion. Broadcom has risen 21% annually to $1,344, continuously expanding applications in data centers and AI.

Manufacturing sector leader: TSMC’s market cap is $717.2 billion. Despite a relatively mild stock price growth of 1.6%, its monopoly position in advanced process technology remains unshaken.

Equipment sector giants: ASML controls the global EUV lithography machine supply, with a 22% annual increase. Applied Materials’ stock price has grown 26% to $203, as the largest supplier of semiconductor manufacturing equipment, with enormous market potential. Lam Research has increased 18.4% to $925, driven by surging demand for etching equipment for AI chips.

Mature process domain: Texas Instruments, as the absolute leader in analog chips, has a 5% annual increase, with a broad moat; Intel faces transformation difficulties, with a 36% plunge to $31.88, but the rebound opportunity exists as the PC market recovers.

Core Investment Opportunities in Segmented Fields

Analog chips have the highest barriers. Texas Instruments’ products are difficult to replicate or surpass, with a broad moat formed by strong sales channels and decades of R&D accumulation, giving it advantages in industrial, automotive, and communication fields. Scale production capacity and cost control will continue to solidify its market position.

Growing demand for communication chips: Qualcomm supplies wireless solutions to mobile phone manufacturers, carriers, and base station vendors, locking in customer resources. The expansion of 5G infrastructure, AR/VR, vehicle networking, and industrial IoT will triple the market space.

Complete AI chip supply chain: NVIDIA leverages GPU advantages and collaborates deeply with tech giants like Microsoft and Apple. TrendForce estimates GPU demand will reach 30,000 units, with NVIDIA holding a significant share. Despite a 77% stock price increase, risks remain. AMD is gradually eating into market share through new process products.

EUV lithography equipment as a key position: ASML holds an absolute monopoly in EUV technology; as long as industry demand persists, this business remains unchallenged. Applied Materials provides high-quality, efficient, and cost-effective solutions, benefiting from rapid growth in display, solar, 5G, IoT, and AI fields. Lam Research focuses on etching equipment, with AI chips requiring far more deposition, etching, and cleaning than traditional chips, offering significant growth potential.

Memory chips revival signals: Micron Technology holds a 22.52% share in DRAM (third place) and 11.6% in NAND flash memory (fourth place), with a 34.7% increase in stock price this year. As market demand gradually recovers, aggressive growth is expected.

Investment Timing at Cycle Turning Points

The semiconductor industry has experienced eight complete cycles since 1990 and is currently in the ninth cycle. This cycle started in the second half of 2019, peaked in October 2021, and, based on the 4-5 year cycle pattern, the bottom is expected to arrive in Q3-Q4 of 2024.

Funds typically react about half a year in advance, making now an ideal time for gradual deployment. Upstream raw materials, driven by base effects and recovery expectations, have shown signs of bottoming out. Although the consumer electronics market remains short-term weak, demand from 5G, AI, and other emerging fields will continue to grow, injecting new momentum into the industry.

Core Factors Influencing Stock Prices and Risks

Downstream demand is the primary driver of semiconductor investments. In 2023, global 5G terminal shipments reached 1.48 billion units (up 31.7% YoY), IoT devices grew 38.5%, and automotive electronics increased 35.1%. The rise of AR/VR applications and the penetration of smart home appliances will continuously expand market capacity.

Inventory levels directly reflect supply and demand. High inventory indicates weak demand or oversupply, putting pressure on stock prices; low inventory suggests strong demand or insufficient supply, favoring stock performance.

Technological innovation determines competitive position. Diversification of AI chips, improvements in EUV lithography yield, and breakthroughs in advanced processes will boost company valuations. Falling behind technologically may lead to loss of market share.

Macroeconomic uncertainties—including interest rate policies, banking risks, and global supply chain fluctuations—may impact semiconductor stock prices. The timing of demand recovery in consumer electronics, the bottoming of data center investments, and the sustainability of AI-driven computing power growth require ongoing observation.

Key Investment Recommendations

The current core approach to semiconductor stocks is: in the early stages of demand recovery, prioritize equipment companies (ASML, Applied Materials, Lam Research) and high-end chip design companies (NVIDIA, AMD, Broadcom, Qualcomm, Texas Instruments). These firms control critical links in the industry chain, have strong risk resistance, and substantial growth potential.

TSMC remains a mid-term stable value leader. Intel, despite its low stock price, has significant rebound potential if it successfully achieves wafer foundry breakthroughs. Micron Technology will benefit first from the memory demand recovery.

Risks in semiconductor investing should not be overlooked—intense technological competition, clear industry cycles, and macroeconomic sensitivities. Investors are advised to deploy gradually during market corrections, hold high-quality leading companies long-term, and closely monitor industry data, technological progress, and policy developments.