Semiconductor Stocks Investment Guide: Finding Opportunities to Grab the Top 10 Chip Leaders

Why is now a good time to position?

The semiconductor industry, dubbed the “new oil,” is experiencing its 9th full cycle. Data shows that after bottoming out in mid-2019, it peaked in October 2021, and this year’s Q3-Q4 is very likely to usher in a new round of lows. The key point is that capital typically senses opportunities about six months in advance, which means that now is already the golden window for deployment.

Why focus on this sector? Simply put, semiconductors are the “brain” of all electronic devices. Without them, electronic products can only run fixed programs—repeating operations and mechanical work. But with chips, we can store information, transmit data, and realize applications. They give life to smart devices.

In recent years, emerging applications have sprung up—Industry 4.0, cloud computing, 5G, new energy vehicles, generative AI. Among them, the explosion of ChatGPT has further accelerated demand for high-performance chips. According to TrendForce forecasts, demand for GPUs alone will reach up to 30,000 units, and this field is dominated by a few leading companies.

Industry division of labor determines investment logic

The semiconductor industry is not a monolith but a highly segmented ecosystem. In simple terms, there are three main models:

Vertical Integration Manufacturing (IDM): Giants like Samsung, Texas Instruments, Intel design and manufacture themselves. The advantage is strong control; the disadvantage is huge investment scale and high management costs.

Chip Design (Fabless): Qualcomm, Broadcom, NVIDIA focus on design. This is a light-asset model with low operating costs but bears market volatility risks.

Foundry (Manufacturing): TSMC, GlobalFoundries provide manufacturing services. They require continuous massive investments to maintain process leadership, forming an oligopoly.

Equipment and Materials: Applied Materials, ASML, Lam Research supply production tools. These companies are upstream in the industry, requiring ongoing innovation, with the highest volatility risks.

From an investment perspective, the most worth关注 are “chip design,” “foundry,” and “semiconductor equipment.” They feature a “long slope, thick snow” characteristic—large market space, long growth cycles, and stable competitive landscape.

Cycle bottom is near, rebound imminent

The semiconductor cycle generally lasts 4-5 years. Since 1990, there have been 8 complete cycles; currently, we are heading into the 9th.

The current cycle began in the second half of 2019. The global chip shortage in 2020 pushed prices up, peaking in October 2021, then started to decline. According to historical patterns, the bottom should appear in the second half of this year. The chart of the Philadelphia Semiconductor Index clearly reflects this trajectory.

More importantly, upstream raw materials are showing signs of bottoming out—combined with base effects and recovery expectations, market sentiment is shifting. Although consumer electronics remain weak in the short term, demand in emerging fields like 5G and AI will continue to grow, enough to be a driving force.

This window period is ideal for smart investors to gradually build positions and prepare for the rebound.

10 semiconductor stocks to watch

Based on market cap rankings and sector potential, the following companies are most representative:

Design leaders

NVIDIA (NVDA): Stock price has risen 77%, but risks have also increased. Thanks to explosive demand for AI chips, its GPU market share is unshakable. Even during last year’s semiconductor downturn, NVIDIA grew against the trend, making it a true beneficiary this time.

Qualcomm (QCOM): The largest 5G baseband chip supplier, with a 53% market share. Its target market is projected to grow from $100 billion to $700 billion by 2030, with AR/VR, vehicle connectivity, and industrial IoT becoming new growth points.

Broadcom (AVGO): Stock up 21%. Expanding product lines through continuous acquisitions, establishing advantages in data center networks, enterprise applications, and cybersecurity. Profitability continues to improve, and AI investments will bring a new round of growth.

AMD: Up 7%, with deep collaborations with tech giants like Microsoft and Apple. New products based on 7nm and more advanced processes will further expand market share. Its stock price growth outpaces earnings changes, with room for a rebound.

Texas Instruments (TXN): The absolute leader in analog chips, up 5%. Low product substitution risk and difficult to surpass, with a broad moat. Decades of R&D and scaled capacity help maintain industry dominance.

Manufacturing leaders

TSMC: The global foundry leader, with a market cap of $717.2 billion. As an industry benchmark, its advanced process technology determines the industry’s development pace.

Intel (INTC): Although down 36%, this could be a buying opportunity. Its foundry business has yet to scale, and R&D investments are huge, but if it succeeds in “overtaking on the bend,” growth prospects are unlimited. The recovery of the automotive and PC markets will bring opportunities.

Equipment leaders

ASML: The only EUV lithography equipment supplier, up 22%. Its monopoly position gives it pricing power; as long as industry demand continues, only it can do this business.

Applied Materials (AMAT): The world’s largest semiconductor manufacturing equipment supplier, up 26%, with a PE of 23.93 and room for growth. Its high-quality, efficient, cost-effective product portfolio benefits continuously from demand in flat panel displays, solar PV, 5G, IoT, and AI.

Lam Research (LRCX): Etching equipment leader, up 18.4%. The deposition, etching, and cleaning needed for AI chips far exceed traditional processes. Even with a PE at 34, there is further upward potential.

Storage leaders

Micron Technology (MU): DRAM market share 22.52% (third), NAND flash memory 11.6% (fourth). Stock up 34.7%. Market demand recovery is imminent, signaling a period of aggressive growth.

Key factors driving stock prices

Downstream demand changes

End-user applications determine chip demand. Computers, communications, automotive electronics, and consumer electronics remain main drivers, but AR/VR is rapidly rising. Future forecasts: in 2023, global 5G terminal shipments will reach 1.48 billion units (up 31.7% YoY), IoT devices will grow 38.5%, and automotive electronics 35.1%.

Inventory levels

Global semiconductor inventory reflects true market supply and demand. High inventory → weak demand or oversupply → pressure on stock prices. Low inventory → strong demand or tight supply → support for stock prices. Currently, inventory levels are improving, which is a positive signal.

Technological innovation

Advances in chip miniaturization, new process yields, and AI chip specialization create differentiation advantages. Companies mastering core technologies will enjoy valuation premiums, and their stock prices will continue to be favored by the market.

Risks to watch in investing

Macroeconomic fluctuations: Interest rate hikes, banking risks, and other macro uncertainties have profound impacts on the entire sector. Continuous monitoring of Fed policies is necessary.

Intense technological competition: Any breakthrough or lag in technology can reshape market structure and market share, directly impacting stock prices.

Uncertain demand recovery: The pace of recovery in consumer electronics, PCs, and smartphones remains uncertain. Whether data center and cloud computing demand can sustain growth needs observation. The sustainability of AI computing power growth also requires verification.

Finding the best entry points

Based on cycle analysis, the next cycle bottom is expected in Q3-Q4, but capital tends to react about six months early. Currently, investors can start to deploy in batches, focusing on equipment stocks (ASML, AMAT), design leaders (NVDA, AMD, AVGO), and Texas Instruments, preparing for the upcoming rebound.

Opportunities in semiconductor stocks are emerging; the key is to grasp the rhythm, control risks, and hold long-term.