The semiconductor industry is not just Nvidia—my “industry-chain perspective” holding logic

Many new investors think buying semiconductors means buying NVDA. In fact, the semiconductor industry chain is long, and different stages follow different logic. On Gate, besides NVDA, I also bought ARM and TSMC—here’s why.

Upstream: Equipment and materials
Representing: ASML, Applied Materials, Tokyo Electron
Logic: Chipmakers expanding production must first buy equipment, which serves as a leading indicator. ASML monopolizes lithography machines, but its stock price is too expensive, so I didn’t buy. Applied Materials is valued more reasonably, but I haven’t researched it in depth, so I set it aside for now and keep it on my watchlist.

Midstream: Chip design and manufacturing
Design: NVDA, AMD, Qualcomm, ARM
Manufacturing: TSMC, Intel
Logic: Design companies have high gross margins, but face fierce competition; manufacturing companies have large capital expenditures, but strong customer stickiness. NVDA is both a design company and an ecosystem leader; TSMC is the absolute leader on the manufacturing side. I hold both, which is like buying a “design + manufacturing” combination.

Why buy ARM? ARM doesn’t produce chips; it only licenses architectures. 99% of mobile phone chips worldwide use the ARM architecture, and it’s now penetrating PCs and servers as well. Its business model is royalty-based—every time an ARM chip is sold, ARM takes a cut. It’s extremely stable, with gross margins above 90%. Also, ARM and NVDA have a good relationship—when NVDA rises, ARM often follows.

Why not buy Intel? Intel lags behind TSMC in manufacturing, and in design it’s squeezed by AMD and NVDA. It’s “not pleasing to either side.” Unless the new CEO can turn things around, I won’t touch it.

My semiconductor portfolio: NVDA (leader) + TSMC (manufacturing) + ARM (architecture). Three positions in different parts of the chain, with different risk-reward characteristics. During drawdowns, they won’t all fall too terribly together; during rallies, I won’t miss out. This is industry-chain allocation, which is healthier than going all-in on a single stock.

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