Semiconductors

What is the semiconductor supply chain?

The semiconductor supply chain is a relay of specialists, and the semiconductors theme is built to span all of it rather than betting on one link. Fabless designers like NVDA, AMD, AVGO, QCOM-class peers, and MRVL define what a chip does but own no factories. Foundries like TSM turn those designs into physical silicon. Equipment makers like ASML and AMAT build the machines the foundries run, while materials and consumables suppliers like ENTG, MKSI, MTRN, ROG, and ESI feed the fabs the chemistries, metals, and process sub-systems they consume on every wafer.

Memory and packaging close the loop. MU supplies the DRAM, NAND, and high-bandwidth memory that sits beside AI accelerators, RMBS supplies the interface chips that move that memory, and AMKR handles the packaging and test that turns finished die into usable parts. Because the semiconductors theme holds names across design, foundry, equipment, memory, materials, and packaging, it tracks the full chip economy instead of a single segment.

How do semiconductor companies make money?

Semiconductor companies monetize different rungs of the same ladder, which is why the semiconductors theme mixes business models on purpose. Fabless designers such as NVDA, AMD, and AVGO earn high gross margins by selling proprietary architectures and software, while outsourcing the costly manufacturing. TSM earns its return on capital by running the most advanced fabs in the world at high utilization, charging for leading-edge capacity that almost no one else can supply.

Further up the chain, ASML and AMAT sell capital equipment and the service contracts that follow it, so their revenue tracks fab build-outs rather than end-device sales. Analog and embedded specialists like TXN sell huge catalogs of long-lived parts into industrial and automotive markets, and IP licensors like ATOM and RMBS collect royalties on technology that ships inside other companies' chips. Holding the semiconductors theme exposes you to all of these revenue engines at once.

Why are semiconductors cyclical?

Semiconductors are cyclical because chip demand, inventory, and fab capacity rarely move in step. When end markets like phones, PCs, autos, and servers overstock, orders contract across the whole chain at once; when they understock, the next demand surge overwhelms lead times. Memory names like MU feel this first and hardest, since DRAM and NAND pricing swings sharply, while analog and embedded names like TXN tend to lag the turn by a quarter or two.

The semiconductors theme spreads exposure across these different cyclical rhythms. Equipment makers like ASML and AMAT ride multi-year fab investment cycles that can run on a different clock from the design and memory segments, and materials suppliers like ENTG and MKSI track wafer volumes more than chip prices. Owning a basket across the stack does not remove the cycle, but it keeps the semiconductors theme from depending on any single segment's timing.

What gets a stock into the Semiconductors theme?

Majority of revenue derived from designing, manufacturing, packaging, or supplying the semiconductor industry. Includes both AI-specific names and broader analog, memory, and specialty silicon.

Semiconductors stocks

Every public name that fits the Semiconductors thesis, with the rationale for inclusion. Click any ticker for the full stock guide. The basket above starts equal-weighted; you set your own target weights inside Walnut.

How to invest in Semiconductors

There are a few common ways to get exposure to semiconductors. You can buy individual stocks across the stack: a designer like NVDA, AMD, or AVGO, the leading foundry TSM, equipment leaders ASML and AMAT, memory through MU, and specialty materials or packaging names like ENTG, MTRN, or AMKR. Picking single names lets you weight the exact links of the semiconductors supply chain you find most compelling, at the cost of more research and more concentration risk in any one company. The ETF route is simpler: SMH (VanEck Semiconductor) and SOXX (iShares Semiconductor) both package the semiconductors industry into one ticker. The tradeoff is concentration versus breadth. SMH is more top-heavy, letting the largest names like NVDA and TSM drive most of the return, while SOXX caps individual weights more aggressively for broader coverage of the semiconductors theme.

The third approach is building a semiconductors basket in Walnut. You describe the exposure you want, for example a global semiconductor supply chain spanning designers, foundry, equipment, memory, and materials, and Walnut's AI assistant proposes constituents and target weights drawn from the semiconductors theme. You fund the basket through your own connected broker, and you approve every order before it is placed. Walnut never trades for you. From there the semiconductors basket tracks as a single performance line you can compare cleanly against SMH, SOXX, or the broader market, so you can see how your specific slice of the semiconductors theme is doing over time.

ETFs used as passive proxies for Semiconductors

If you want the theme as a single ticker rather than as a basket, these are the ETFs people most commonly use. Each has trade-offs (concentration, expense ratio, sector overlap) covered in the individual ETF guides.

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