Semiconductor Stock Investment Landscape in the Chip Wave: Key Industry Participants Overview

From “New Oil” to the industry’s neural hub, the strategic position of semiconductors is beyond doubt. As the “brain” of electronic devices, they give life to cold machines—without semiconductors, electrical appliances can only perform a single function; with them, data storage, transmission, and application become possible.

With explosive growth in AI, IoT, 5G, new energy vehicles, and other fields, the entire semiconductor industry chain is entering a new cycle of prosperity. For investors, understanding industry division of labor and mastering key participants are the core to capturing opportunities in semiconductor stocks.

Industry Division of Labor Determines Investment Logic

The semiconductor industry originated in the United States and has evolved through Japan, South Korea, Taiwan, and other regions, now forming a highly segmented vertical division of labor system.

IDM Model (Vertical Integration) is dominated by giants like Samsung, Texas Instruments, and Intel. These companies require large scale and high management costs.

Fabless (Chip Design) includes low-asset companies like Qualcomm, Broadcom, Nvidia, with relatively low operating costs but market volatility risks.

Foundry (Wafer Manufacturing) led by TSMC and GlobalFoundries involves huge investment scales, resulting in an oligopoly.

Semiconductor Equipment and Materials are supplied by Applied Materials, ASML, Lam Research, and others, serving as the foundational infrastructure of the industry.

Industry consensus holds that chip design, wafer manufacturing, and equipment sectors have the most investment potential, characterized by “long slope and thick snow”—broad market space and steady growth.

Semiconductor Cyclical Patterns and Entry Timing

Since 1990, the global semiconductor industry has experienced 8 complete cycles, currently in the 9th. Generally, each cycle lasts 4-5 years.

The current cycle began in the second half of 2019, with a shortage and price surge in chips during 2020-2021, with a peak turning point in October 2021. Based on historical patterns, the bottom of this cycle is expected in Q3-Q4 of this year. Since capital usually reacts about six months in advance, now is a good time to gradually deploy.

Upstream raw materials have shown signs of bottoming out. Although the consumer electronics market remains soft, demand in emerging fields like 5G and AI continues to heat up, creating a pattern of new and old driving forces.

Key Industry Participants in Detail

The moat of simulation chips—Texas Instruments (TXN)

Founded in 1930, Texas Instruments is the world’s largest supplier of analog semiconductors. The core characteristic of analog chips is that they are difficult to replicate or replace, which has built a deep competitive barrier for TI.

With decades of R&D accumulation, scaled production capacity, and cost advantages, TI holds an absolute position in industrial, automotive, communications, and consumer electronics sectors. This year, its stock price has risen 5%, with a P/E ratio of 27, and prospects look promising driven by AI benefits.

The direct beneficiary of AI computing power—Nvidia (NVDA)

Nvidia started with graphics cards but has become the most dazzling star in the AI wave. ChatGPT has ignited generative AI applications, with major tech giants racing to deploy, and Nvidia’s GPUs are almost industry standard.

According to TrendForce, the demand for GPUs needed for generative AI will reach 30,000 units, with Nvidia holding an overwhelming advantage in this field. Despite the overall downturn in the semiconductor industry last year, Nvidia still defied the trend, with its stock price soaring 77% this year, an astonishing increase. Investors should be cautious of risk corrections.

The integrator of communication solutions—Broadcom (AVGO)

Broadcom focuses on data center networks, enterprise applications, 5G communications, and industrial automation. Through continuous acquisitions to expand product lines and market share, it has become a leader in its niche.

This year, its stock price increased 21% to $1,344, with continuous profit level improvements. As investments in AI and intelligent fields accelerate, Broadcom is expected to provide more efficient one-stop solutions, with room for further stock price growth.

The absolute leader in 5G baseband—Qualcomm (QCOM)

Qualcomm has been deeply involved in wireless technology for decades, with a 53% market share in 5G baseband chips. Besides terminal chips, patent licensing is also a significant revenue source.

The company’s target market is projected to expand from the current $100 billion to $700 billion by 2030, with emerging applications like AR/VR, vehicle networking, and industrial IoT continuing to drive growth. The stock price has been roughly flat this year, with a relatively reasonable valuation.

The dark horse in the CPU market—AMD (Advanced Micro Devices)

AMD has deepened cooperation with tech giants like Microsoft and Apple, making strides in data center and consumer processors. Its stock price has risen 7% to $157 this year, with growth outpacing profit increases, reflecting market optimism about its future prospects.

Upcoming new products based on 7nm and more advanced processes are expected to further increase AMD’s global market share.

The absolute monopolist in lithography machines—ASML

ASML is the only global supplier of EUV lithography machines, a position that is hard to shake. Deeply tied to wafer fabs like Samsung, TSMC, and Intel, it controls the lifeline of semiconductor process upgrades.

This year, its stock price increased 22%. Despite revenue outlook adjustments, as the only supplier of industry-essential equipment, ASML’s monopoly profits will persist as long as downstream demand continues.

The leader in wafer manufacturing equipment—Applied Materials (AMAT)

Applied Materials is one of the largest global semiconductor manufacturing equipment suppliers, also involved in flat panel displays and solar PV fields. Its main products feature high efficiency and cost-effectiveness, helping customers reduce costs and increase capacity.

This year, its stock price rose 26% to $203, with a P/E ratio of 23.93, leaving room for further growth. The demand for equipment such as deposition and etching will continue to be driven by AI chip manufacturing needs.

The traditional advantage in waste—Intel (INTC)

Once the king of PC processors, Intel is now caught in a strategic dilemma. Its self-built wafer foundries require huge investments but have yet to generate profits. Facing TSMC’s technological lead, Intel is struggling to catch up.

This year, its stock price fell 36% to $31.88, with a P/E ratio of 32.87, making investment less attractive. However, there may be opportunities—if it succeeds in overtaking, the stock could rebound significantly. The recovery of the smart car and PC markets will provide opportunities for relief.

The core supplier of etching processes—Lam Research (LRCX)

Lam Research focuses on equipment for etching, cleaning, and other critical manufacturing steps. The demand for these processes in advanced chip manufacturing is increasing daily, especially as AI chips require more complex deposition and etching processes.

This year, its stock price increased 18.4% to $925, with a P/E ratio of 34, at a high point, but considering future demand, investors can consider buying on dips during market corrections.

The recovery of storage chips—Micron Technology (MU)

Micron holds a 22.52% share in DRAM (third place) and 11.6% in NAND flash memory (fourth place), making it a key player in storage chips. After last year’s cyclical low, its stock price has risen 34.7%, with clear signs of market demand recovery.

As AI training and inference demand for storage capacity surges, Micron is expected to achieve aggressive growth in this cycle.

New Variables in Demand

Semiconductor end applications cover traditional fields like computing, communication, automotive electronics, and consumer electronics, while emerging fields such as AR/VR, edge computing, and smart home are rapidly rising. These new demands not only boost chip shipments but also promote design process migration from mature to advanced nodes.

In 2023, global 5G terminal shipments are expected to reach 1.48 billion units, IoT device shipments will increase by 38.5% YoY, and automotive electronics by 35.1% YoY. The diversified downstream market demand will continue to provide growth momentum for semiconductor stocks.

Core Factors Affecting Stock Prices

Inventory changes are short-term indicators. High inventory reflects market weakness, low inventory indicates strong demand, directly impacting stock price movements.

Technological innovation determines long-term success. Who masters advanced processes, who launches killer chips, and who leads in equipment technology will win market favor. Currently, diversification in AI chips and improvements in EUV lithography yield are driving related stocks to new highs.

Macroeconomics is an external constraint. Environment of interest rate hikes, banking system stability, and global trade policies all influence financing costs and market demand for semiconductor companies.

Investment Risks to Note

The semiconductor industry is highly cyclical with fierce technological competition. Falling behind may lead to sharp market share loss. Persistent weakness in consumer electronics demand, sustainability of AI computing growth, and geopolitical disruptions to supply chains are black swan events investors must monitor closely.

Additionally, risks vary greatly among different types of semiconductor stocks—design companies need to focus on end markets, foundries on capacity utilization, equipment firms on downstream capital expenditure cycles. Precise risk management is crucial.

Currently, the semiconductor sector is at the bottom of the cycle, but pinpointing the right entry point still requires comprehensive analysis of individual stocks’ fundamentals, technicals, and market sentiment.