Recently, I noticed a quite interesting phenomenon—countries around the world are competing for chips, and Taiwanese semiconductor companies are becoming market focal points. Rather than seeing this as a coincidence, it’s more about the industry landscape at play.

Speaking of semiconductors, many people only know that they are important, but few truly understand their role in the entire electronic ecosystem. Simply put, semiconductors are the "brain" of electronic devices. Without them, all electronic products can only perform repetitive tasks. With semiconductors, we can store information, transmit data, and run complex applications. That’s why they are called the "new oil" of the digital economy.

In recent years, industry changes have been especially rapid. Industry 4.0, cloud computing, 5G, new energy, electric vehicles, plus the AI wave driven by ChatGPT, have pushed semiconductor demand into a new growth phase. According to data, in 2023, global 5G terminal shipments reached 1.48 billion units, IoT devices grew 38.5% year-over-year, and automotive electronics increased 35.1%. Behind these numbers is huge demand for chips.

The division of labor in the semiconductor industry is very detailed. There are chip design companies (Fabless), like Qualcomm, NVIDIA, Broadcom, which are asset-light with low operating costs. There are foundries (Foundry), with TSMC as the representative—these companies require large-scale investments but can form oligopolies. There are also equipment and materials providers, like ASML and Applied Materials, which are key choke points. If you’re looking for investment opportunities, these three segments are the most worth paying attention to.

When it comes to Taiwanese semiconductor stocks, TSMC (TSM) and UMC are must-mentions. TSMC dominates the global foundry market and is the main manufacturer for tech giants like Apple, NVIDIA, and AMD. As AI computing power demand explodes, TSMC’s orders and capacity utilization are rising. UMC, though smaller, also has competitiveness in certain areas. Additionally, there’s HIMX, which has a foothold in display driver chips.

In the US stock market, NVIDIA (NVDA) is undoubtedly the focus. GPU demand is expected to reach 30k units, giving NVIDIA a clear advantage. Texas Instruments (TXN) is a leader in analog chips, with low product substitutability and a deep moat. Qualcomm (QCOM), as the largest 5G baseband chip supplier, holds a 53% market share, with the target market expected to grow from $100 billion to $700 billion by 2030. AMD (AMD) has also performed very well in recent years, with growth in gaming and data center businesses. Broadcom (AVGO), through continuous acquisitions, has expanded its product line and become a dominant player in communication chips.

On the equipment side, ASML is the world’s only supplier of EUV lithography machines, meaning as long as industry demand persists, only ASML can do this business. Applied Materials (AMAT) and Lam Research (LRCX) are also essential equipment suppliers for semiconductor manufacturing.

What’s the outlook for the current cycle? The last full cycle started in the second half of 2019, peaked in October 2021, then adjusted until bottoming out in 2023. A new upward cycle clearly began in 2024, driven by AI computing demand and industry-wide price increases. Currently (mid-May), we are in the middle to late stage of the cycle’s uptrend. The long-term prosperity has been established, but short-term momentum is overheating, and correction pressures are accumulating.

What does this mean? It’s not the time to bottom fish, but rather to grasp structural opportunities once the trend is confirmed. If you’re a short-term trader, you can refer to technical analysis: buy when the stock price breaks above the 5-day moving average and the 5-day crosses above the 10-day, or buy on dips at support levels. For selling, consider taking profits when RSI shows overbought divergence, or reduce holdings when volume stagnates and prices stall.

Many factors influence Taiwanese semiconductor stocks and the overall sector trend. Downstream demand changes are the most direct drivers; inventory levels reflect supply and demand relations; technological innovation brings new competitive advantages. Macroeconomic conditions, interest rate environments, and geopolitical risks also require attention.

As for risks, be wary of macroeconomic instability, intensified technological competition, and weakening market demand. The semiconductor industry requires continuous R&D investment and technological breakthroughs—falling behind means being eliminated. Whether the recovery in consumer electronics demand, growth in data center cloud computing, and the sustainability of AI-driven computing power growth can be maintained all need further observation.

In summary, the logic behind Taiwanese semiconductor stock recommendations is clear: the global AI wave drives chip demand, and Taiwanese companies occupy a key position in the industry chain. But investment decisions should also consider your risk tolerance and trading cycle; don’t blindly chase high based solely on long-term logic.