Boshi Digital Economy Mixed Fund Manager Xiao Ruijin recently stated that the semiconductor industry chain has demonstrated robust performance. In a media interview, Xiao shared insights on investment opportunities within the semiconductor sector.
According to Xiao, the strong performance of the semiconductor industry is primarily driven by three key factors, creating a "multi-driver resonance" effect. Firstly, global demand for AI computing power center construction continues to grow. Based on financial briefings from major domestic internet companies, capital expenditure on computing power in China is expected to increase significantly in 2026 compared to 2025, directly boosting high-growth segments such as GPU chips and memory chips.
Secondly, accelerated expansion of overseas wafer fab capacity and progress in domestic chip innovation are jointly driving major wafer foundries both domestically and internationally to raise their capital expenditure plans, thereby benefiting semiconductor equipment and materials.
Finally, on the demand side, after three years of inventory reduction, the traditional semiconductor industry is entering a restocking cycle starting in 2025. Coupled with substantial price increases in upstream precious metals, cost pressures are pushing chip prices higher, accelerating downstream customers' restocking demand. This has led to price increases for mature process products like analog chips and MCU chips. These three factors collectively contribute to the current high industry vitality.
Regarding the current industry cycle, Xiao believes the sector is in the middle of an innovation cycle but at the early stage of an inventory cycle. Specifically, AI-related capital expenditure is expected to remain high in 2026. With continuous advancements in large models and AI agents, previous capital investments will begin generating cash returns this year, extending the AI innovation cycle in both depth and breadth. Thus, AI technology is in the mid-phase of its innovation cycle.
However, from a recovery perspective, traditional non-AI driven markets—such as consumer, industrial control, automotive, and communications—are seeing supply constrained by emerging AI demand. Capital expenditure is increasingly focused on AI needs, leaving traditional demand underserved. This results in greater price elasticity for traditional chips during the industry's restocking phase, indicating an early inventory cycle.
A key signal to watch is the inventory turnover days of downstream enterprises, which remain at historically low levels and have not yet reached safe inventory thresholds.
Among various industry segments (such as equipment, materials, design, and manufacturing), Xiao identifies memory chips, along with the equipment and materials required for memory wafer fab expansion, as likely beneficiaries of the current memory upcycle. Domestic semiconductor manufacturing leaders are expected to gain from progress in independent innovation and advanced process capacity expansion.
Additionally, traditional chip design companies stand to benefit from price elasticity during downstream restocking. Although rising precious metal prices increase cost pressures, these companies can pass costs to downstream customers through price adjustments, potentially expanding profit margins.
Xiao maintains a positive outlook on China's semiconductor industry, noting that the sector has entered a harvest period for domestic technological innovation. Continued investment in key processes, equipment, and materials is expected to yield significant innovative results, enhancing the overall strength of China's semiconductor supply chain and creating numerous investment opportunities.
He advises retail investors to evaluate secondary market opportunities from an industrial perspective, adhere to value investing principles, reduce speculative frequent trading, avoid potential risks, and capture returns from industrial value growth.
Xiao stated that he remains optimistic about China's semiconductor industry and will continue overweighting key domestic innovation segments—including critical processes, equipment, and materials—in the first quarter of 2026. The fund will also overweight cyclical semiconductors like domestic AI computing chips and memory chips, while maintaining an underweight position in power semiconductors driven by new energy demand. The strategy will focus on monitoring progress in China's semiconductor independence and AI technology evolution to effectively capture potential investment opportunities in the semiconductor industry.
Risk Disclosure: The information contained in this material does not constitute a service for buying or selling any securities or providing any investment decision advice. This information should not be considered as targeted, specific investment guidance at any time. Investors should evaluate the information based on their own circumstances, make independent decisions, and bear risks independently. No express or implied warranty is made regarding the accuracy, reliability, timeliness, or completeness of the content. The information reflects conditions as of the date of publication and is subject to change. Unauthorized commercial use, dissemination, or editing by third parties is prohibited.
