What is a semiconductor foundry?

A semiconductor foundry is a specialized factory that manufactures computer chips (integrated circuits) for other companies. Unlike companies like Intel that design and make their own chips, pure-play foundries like TSMC focus solely on manufacturing, producing chips designed by clients like Nvidia, Apple, and AMD. Foundries are extremely capital-intensive businesses requiring billions in equipment and highly specialized expertise.

Why are semiconductor companies important for AI?

AI systems require enormous computing power to process the complex mathematical calculations needed for machine learning. This computing power comes from specialized chips that must be increasingly powerful, energy-efficient, and tailored for AI workloads. The companies in this group provide the essential technology to design, manufacture, and test these advanced AI chips. Without continued advancement in semiconductor technology, AI development would hit a hardware ceiling.

What is EUV lithography and why does it matter?

EUV (Extreme Ultraviolet) lithography is an advanced manufacturing technology used to create the tiniest features on modern computer chips. Think of it as an incredibly precise printing press that uses light to etch microscopic patterns. ASML is the only company in the world that makes these complex machines, which cost over $150 million each. EUV lithography is essential for producing the most advanced AI chips because it enables manufacturers to pack more transistors onto each chip, making them more powerful and energy-efficient.

What does EDA software do?

Electronic Design Automation (EDA) software is specialized technology that helps engineers design complex computer chips. Modern chips can contain billions of transistors, making manual design impossible. Companies like Synopsys and Cadence create the essential software tools that automate this process, allowing engineers to design, simulate, and verify chip designs before manufacturing. Without EDA tools, creating advanced AI chips would be virtually impossible, making these software companies critical gatekeepers in the semiconductor industry.

What is a semiconductor supercycle?

A semiconductor supercycle is an extended period of strong growth in the chip industry that lasts longer than typical boom-bust cycles. It's driven by fundamental shifts in technology adoption rather than just normal economic cycles. The current AI-driven supercycle is fueled by massive demand for advanced chips needed for AI applications, requiring significant manufacturing capacity expansion. This benefits the entire semiconductor ecosystem, from foundries to equipment suppliers to design software companies, potentially lasting several years as AI adoption continues to accelerate.

15 handpicked stocks

AI's Foundry Foundation

This carefully curated group of stocks represents the essential companies building the hardware backbone of the AI revolution. Selected by professional analysts, these stocks include the critical semiconductor manufacturers, equipment suppliers, and design software firms that make advanced AI chips possible.

Han Tan | Market Analyst

Updated 2 days ago | Published at July 11