The semiconductor sector has experienced a significant correction in July, prompting investors to reassess which segments of the supply chain offer the most compelling opportunities. The industry is composed of distinct layers: equipment driven by capital expenditure, materials constrained by production line validation, manufacturing focused on advanced process node evolution, and chip design, which serves as the direct interface with end-user demand and is thus highly sensitive to cyclical shifts. As artificial intelligence (AI) demand expands from computational power to storage and edge devices, the chip design segment is emerging as a critical area for focused attention.
Why the focus on chip design?
To understand the potential of chip design, one must first consider its position within the broader semiconductor value chain. Unlike equipment, materials, and manufacturing, the chip design segment is more closely tied to the end-application market. Whether it involves cloud-based training, edge inference, or the iteration of new devices like AI glasses and humanoid robots, changes in demand are transmitted to the design stage more quickly. This proximity means that when the industry enters an up cycle, chip design companies are often the first to experience shifts in order volumes and pricing dynamics. Furthermore, because these companies typically operate with a relatively asset-light business model, their profitability and valuation multiples tend to demonstrate greater elasticity during periods of demand recovery.
The primary catalyst for the current semiconductor cycle is AI, which is reshaping chip demand across multiple dimensions. The first is computing power. Whether for large-scale AI model training or accelerated inference, high-performance chips such as GPUs and ASICs remain the fundamental infrastructure. The continued expansion of AI-related capital expenditure both domestically and internationally is expected to directly sustain a high level of activity in the chip design sector. Industry guidance suggests that the relevant market size could achieve a compound annual growth rate of over 50% from 2025 to 2030.
The second dimension is storage capacity. The ongoing evolution of large AI models imposes higher demands on data exchange and memory. Since September 2025, several major storage manufacturers have successively raised product prices. Prices for storage products used in servers, smartphones, and PCs are expected to continue rising in the fourth quarter. With the listing and expansion of domestic storage leaders, the industry's momentum is likely to cascade further into the design segment.
Perhaps the most significant development is on the edge. While the initial impact of AI on semiconductors was concentrated in the cloud, terminal innovation is poised to be a key source of incremental growth in the next phase. The continuous iteration of new products—such as AI PCs, AI glasses, and smart driving systems—is expected to drive demand for analog chips and specialty integrated circuits. The convergence of computing power, storage capacity, and edge devices makes the earnings visibility and upside potential of the chip design segment particularly compelling.
An efficient tool for allocation: The STAR Chip Design Index
Selecting individual stocks within the chip design sector is not straightforward. These companies cover a wide range of sub-segments, each with distinct cyclical timing. Moreover, internal differentiation among chip design firms is often significant, influenced by factors such as order execution, research and development progress, and product life cycles. For most investors, using an index tool can be a more efficient and effective approach to allocation.
Among the relevant indices, the Shanghai Stock Exchange STAR Chip Design Thematic Index (950162)—hereafter referred to as the "STAR Chip Design Index"—offers a combination of high purity, growth potential, and cost-effectiveness. This index selects 50 constituent stocks from the STAR Market that are involved in chip design, covering key areas such as digital and analog chip design. It serves as a strong representation of the overall development trajectory of the domestic chip design industry.
In terms of purity, as of July 31, 2026, the weight of digital chip design in the STAR Chip Design Index reached 79.31%. Compared to other semiconductor indices, its exposure to the chip design segment is more pronounced, making it a suitable choice for investors seeking a precise allocation to this area.
Regarding growth potential, all constituent stocks of the STAR Chip Design Index are listed on the STAR Market. The index exhibits a distinct growth and small-to-mid-cap characteristic. Combined with the STAR Market's 20% daily price fluctuation limit, the index tends to demonstrate strong upside momentum when a market rally begins.
Note: The CSI Chip Design Index code is 932040, the STAR Composite Index code is 000680, and the CSI 300 Index code is 000300. According to Wind data as of July 31, 2026, the STAR Chip Design Index has outperformed the CSI Chip Design Index and the STAR Composite Index in terms of returns year-to-date, over the past year, and over the past two years. This historical performance suggests a strong offensive characteristic, both in short-term recovery and medium-term rallies. Data source: Wind, data as of July 31, 2026. Note: The securities market in China has a short history. Past performance does not represent all stages of market operation and does not constitute a guarantee of fund performance. The trading rules of the STAR Market differ significantly from other boards, and stock prices are prone to large fluctuations. Investors should be aware of downside risk and make prudent decisions.
Finally, consider the risk-return profile. A common drawback of high-growth indices is that they can experience sharp declines as well as rapid rises. However, historical data shows that as of July 31, 2026, the STAR Chip Design Index had a one-year Sharpe ratio of 1.93 and a Calmar ratio of 1.98. These figures are higher than those of the CSI Chip Design Index, the STAR Composite Index, and the CSI 300 Index over the same period. This favorable risk-adjusted performance makes the index more compelling from a portfolio construction perspective. Data source: Wind, data as of July 31, 2026. The Sharpe ratio represents risk-adjusted returns.
The Guotai STAR Chip Design Thematic ETF Link Fund (Class A: 028149, Class C: 028150) is currently being offered. This product invests primarily in the STAR Chip Design ETF, closely tracking the performance of the STAR Chip Design Index, providing an allocation tool for over-the-counter investors.
The semiconductor industry is not a monolithic sector. In each market cycle, the sub-segment that delivers superior returns can differ. At this point, while equipment, materials, and manufacturing each have their own investment logic, the chip design segment stands out from the perspectives of demand sensitivity, earnings sustainability, and upside potential. For investors who are optimistic about the growth opportunities in the chip design space, the Guotai STAR Chip Design Thematic ETF Link Fund (Class A: 028149, Class C: 028150) is worth considering.
Risk Disclaimer: Funds involve risks. Investment must be made with caution. This fund is issued and managed by Guotai Fund. The distributor does not assume responsibility for the investment or redemption of the product. Past performance of a fund does not predict its future performance. The performance of other funds managed by the fund manager does not guarantee the performance of this fund. This fund is an ETF linked fund. The target ETF is an equity index fund. Its expected return and risk level are theoretically higher than those of hybrid funds, bond funds, and money market funds. This fund primarily tracks the performance of the underlying index by investing in the target ETF. It has a risk-return profile similar to that of the underlying index and the securities market it represents. This fund invests in STAR Market stocks. It is subject to specific risks arising from the STAR Market mechanism, including differences in investment targets, market systems, and trading rules, such as significant stock price volatility, liquidity risk, delisting risk, and market risk. Investment involves risk. Before making an investment decision, investors should carefully read the Fund's Prospectus and Fund Contract, fully consider their own risk tolerance, and invest prudently. The fund's fee structure is as follows: The views expressed are for reference only and are subject to change based on market conditions. They do not constitute investment advice or a commitment. Before investing, investors should carefully read the Fund Contract, Prospectus, Product Information Summary, and risk disclosure documents to understand the fund's risk-return profile and assess whether the fund is suitable for their risk tolerance based on their own investment objectives, time horizon, experience, and financial situation. A MACD golden cross signal has formed, with these stocks showing strong upward momentum.
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