In-depth analysis of the investment logic of semiconductor concept stocks: Analyzing 10 industry leaders

As the infrastructure of the global information industry, semiconductors have long become the core force driving the digital transformation of the economy. From traditional industrial control to emerging artificial intelligence applications, from communication infrastructure to new energy fields, the penetration rate of semiconductors is increasing year by year. This “core” organ endows electronic devices with the ability to shift from passive execution to intelligent decision-making.

With ChatGPT sparking a wave of generative AI, the industry’s demand for high-performance chips has surged, coupled with the release of industry upgrade demands such as 5G, Industry 4.0, and electric vehicles. The semiconductor industry is currently in a new growth cycle. This article will systematically introduce investors to the structure of the semiconductor industry and analyze the 10 most promising concept stocks in the current market.

The Three Core Segments of the Semiconductor Industry Chain

After decades of evolution, the semiconductor industry has transitioned from a vertically integrated model to a highly specialized division of labor system. According to functionality, it mainly includes three core segments:

Chip Design (Fabless) responsible for product innovation and technology R&D, with leading companies including Qualcomm, NVIDIA, Broadcom, etc. These companies have light assets and relatively controllable R&D costs but need to cope with market volatility risks.

Foundry responsible for manufacturing and process upgrades, with representative companies such as TSMC and GlobalFoundries. This segment requires continuous large-scale capital investment to maintain process leadership, forming a natural oligopoly pattern.

Semiconductor Equipment and Materials providing upstream tools and raw materials, including Applied Materials, ASML, Lam Research, etc. This field is high-risk and capital-intensive but holds significant influence.

From an investment perspective, the above three segments are regarded as “long-term growth, stable competition” high-quality tracks due to their industry characteristics—clear long-term growth trends and relatively stable competitive landscape.

Industry Leaders Panorama

Among many semiconductor companies, based on market value and segment strength, the following 10 companies are worth close attention:

NVIDIA (NVDA.US) with a market cap of $2.19 trillion, is the absolute leader in AI chips. Leveraging its monopoly advantage in GPU technology, it has gained huge attention amid the ChatGPT-driven AI boom. This year, its stock price has increased by 77%, reflecting market recognition of its prospects, but investors should also be cautious of valuation risks.

TSMC (TSM.US) with a market cap of approximately $717.2 billion, is the undisputed leader in global wafer foundry. Its advanced process capabilities and capacity scale are difficult to replicate, and long-term cooperation with clients like Intel and Samsung provides a stable revenue base. Currently, its P/E ratio is 27.3, with a dividend yield of 1.6%, offering both growth and income potential.

Texas Instruments (TXN.US) as the world’s largest analog chip supplier, serves customers across industrial, automotive, communication, and other key sectors. The high difficulty of technology substitution and strong product stickiness have built broad competitive barriers. The company’s stock price has increased by 5% this year, with a P/E of 27, and it holds long-term investment value driven by AI industry upgrades.

Broadcom (AVGO.US) with a market cap of about $622.8 billion, holds advantages in data center networking and enterprise storage. Through continuous acquisitions to expand its product portfolio, it has become a dominant player in its niche. This year, its stock price has risen by 21% to $1,344, with improving profitability.

Qualcomm (QCOM.US) is the largest supplier of 5G baseband chips, with a market share of 53%. As a core provider of mobile communication components, its target market is expected to grow from the current $100 billion to $700 billion by 2030. Its current P/E ratio is 24, with room for further growth.

Advanced Micro Devices (AMD.US) with a market cap of about $254.3 billion, competes with Intel and NVIDIA in CPU and GPU fields. In recent years, it has maintained growth through deepening cooperation with Microsoft and Apple. Its stock price has increased by 7% this year, with new products based on 7nm and more advanced processes expected to further expand market share.

ASML (ASML.US) with a market cap of approximately $365 billion, is the only global company mastering core EUV lithography machine technology. Its products play a decisive role in the development of advanced semiconductor processes. The stock price has increased by 22% this year, despite a slight adjustment in revenue guidance, its monopoly position ensures long-term demand certainty.

Applied Materials (AMAT.US) with a market cap of about $169 billion, is the world’s largest semiconductor manufacturing equipment supplier. Its product portfolio is comprehensive, covering the entire chip manufacturing process. The stock price has risen by 26% to $203 this year, with a P/E of 23.9. As 5G, AI, and IoT applications expand, demand for its equipment remains resilient.

Intel (INTC.US) with a market cap of approximately $135.7 billion, has long dominated the PC and server processor markets. Although currently challenged by AMD, ARM, and others, its market position remains strong. Its stock price has fallen by 36% this year, with a P/E of 32.87, presenting a quality buying opportunity after adjustment, especially with expectations of recovery in automotive and PC markets.

Lam Research (LRCX.US) with a market cap of about $121 billion, focuses on etching equipment. The increasing demand for etching processes in AI chip manufacturing drives order growth. Its stock price has increased by 18.4% to $925, with a high P/E of 34, but with clear demand prospects.

Industry Cycles and Investment Timing

The semiconductor industry exhibits obvious cyclicality, with a complete cycle generally lasting 4-5 years. Since 1990, the industry has experienced eight major cycles, and currently, it is in the ninth.

This cycle began in the second half of 2019. In 2020, due to chip shortages, it reached a peak, with a turning point at the end of October 2021, followed by a correction phase. Based on industry patterns, the bottom of this cycle is expected to occur in the third or fourth quarter of this year. The capital markets usually react about half a year in advance to cycle turning points, indicating that the current timing is a suitable window for gradually deploying semiconductor investments.

Core Factors Driving Price Movements

Downstream demand iteration is the main force driving semiconductor stock prices, continuously evolving. From PCs and smartphones to IoT, 5G, AI, and automotive electronics, each demand upgrade brings new growth opportunities. Market forecasts predict that in 2023, global 5G terminal shipments will reach 1.48 billion units, a year-on-year increase of 31.7%; IoT device growth at 38.5%; automotive electronics at 35.1%. Fields like AR/VR are also expected to become important demand drivers.

Inventory levels reflect the degree of supply-demand imbalance. Low inventory usually indicates strong demand or supply shortages, supporting stock prices; high inventory often signals market oversupply, exerting pressure on prices.

Technological progress provides industry participants with new competitive advantages. When companies master advanced processes, new architectures, or innovative application fields, their stock prices often receive market premiums. Examples include NVIDIA’s diversified GPU technology and ASML’s EUV lithography capacity expansion.

Investment Risks Not to Be Ignored

Macroeconomic fluctuations—in environments of rising interest rates and slowing economic growth—reduce corporate investment willingness, directly impacting chip demand. Recent banking sector turbulence and Fed policy uncertainties require close attention.

Intensified technological competition—the R&D investment in semiconductors is huge; breakthroughs or falling behind can lead to drastic market share changes. Companies must continuously maintain leadership in design, process manufacturing, and packaging.

Weakening terminal markets—the recovery of consumer electronics demand remains uncertain; the outlook for mobile phones and PCs has variables. Whether the demand growth for AI chips in data centers can be sustained needs further verification.

Investors should consider industry cycles, valuation levels, and risk factors comprehensively when allocating semiconductor concept stocks, establishing a balanced portfolio.