Semiconductors

Investment Thesis

Semiconductors underpin every major structural growth theme — AI compute, electric vehicles, defense systems, industrial automation, and IoT devices — creating demand across multiple end-markets simultaneously. Government subsidy programs (U.S. CHIPS Act, EU Chips Act, Japan FABS Act) are funding domestic fab expansion for the first time in decades. Geopolitical fragmentation between the U.S. and China is creating redundant supply chains that require substantially more global capacity than a single-source model ever did.

Theme Score Breakdown

Semiconductors score high Strong because they are foundational to every structural growth theme and the CHIPS Act, EU Chips Act, and Japan FABS Act represent the largest coordinated industrial policy in the sector's history. Durability drops to 11 because semiconductor cycles are genuinely brutal — inventory corrections can destroy 50-70% of earnings within a single year, making the 'structural' story hard to sustain through the experience of holding through a downturn. The -8 risk penalty is the harshest in the library and reflects three compounding risks: the severity of cyclical corrections, the existential Taiwan scenario, and export control exposure that can change with a single executive order.

Key Risks

• Cyclical demand downturns causing inventory corrections across the supply chain
• China-Taiwan geopolitical disruption threatening TSMC production
• End-market concentration in AI capex creating single-point-of-failure risk
• Export control escalation disrupting cross-border equipment and IP flows