Image Source: Unsplash

Introduction

Semiconductor companies that design their own semiconductor chips but outsource the fabrication of them to specialized manufacturers as opposed to doing so themselves (i.e., are fabrication-less or "fabless")  to avoid the massive capital costs of owning a fabrication plant and this market is projected to more than double by 2034.

The AI Hardware Sector

The AI hardware sector consists of 6 distinct sub-segments, each with its own unique dynamics and growth trajectories. The first 4 sub-segments are referred to as the semiconductor value chain and consist of the 4 stages in the pure-play design, production and testing/packaging of semiconductor wafers (chips), namely:

1. software design companies that are involved exclusively (i.e. pure-play) in the custom design of complex semiconductor chips using sophisticated electronic design automation (EDA) software.
2. production equipment and material companies that provide essential equipment for manufacturing chips such as lithography  machines, and production materials such as chemicals and gases.
3. manufacturing companies, called foundries in industry jargon, that concentrate all their efforts in the fabrication of chips based on the designs provided by other semiconductor companies.
4. assembly/testing/packaging companies that assemble chips into finished semiconductor components, tests for defects and do the very specialized packaging of the chips for shipping.

The 5th sub-segment consists of hardware companies that design their own semiconductor chips but outsource the fabrication of them to specialized manufacturers (i.e., are fabrication-less or "fabless") as opposed to doing so themselves to avoid the massive capital costs of owning a fabrication plant and this market is projected to more than double by 2034.

August Catalysts

Monolithic Power Systems (MPWR), one of the 6 largest pure-play fabless semiconductor companies trading on U.S. stock exchanges and a constituent in our Pure-Play Fabless Semiconductor Stocks Portfolio, is contributing significantly to that growth as reflected by its stock price that was UP 17.5% in August (and UP 44% YTD). Below are catalysts for the surge in August:

• Aggressive Q2 Revenue Growth: Q2 revenue was up 4.2% vs. Q1.
• Optimistic Q3 Guidance: management projects a 7% to 10% increase in Q3.
• Favorable Analyst Ratings/Price Targets: 7 of the 13 analysts that cover MPWR issued new ratings in August of which 3 had "Strong Buy" ratings, 2 had "Buy" and 2 had "Hold" with 2 of the analysts targeting a 12% increase in MPWR's stock price over the next 12 months.
• AI Infrastructure Tailwinds: MPWR is a key supplier of power management chips for AI data centers, a sector exploding with demand, and investors recognized its mission-critical role in next-gen AI hardware, driving speculative and institutional buying.

Pure-Play Fabless Semiconductor Stocks Portfolio

As mentioned above, there are 6 constituents in our Pure-Play Fabless Semiconductor Stocks Portfolio and below are their performances in August, in descending order:

1. Monolithic Power Systems (MPWR): UP 17.5% in August
2. Qualcomm (QCOM): UP 9.5%
3. Broadcom (AVGO): UP 1.3%
4. Nvidia (NVDA): DOWN 2.1%
5. Advanced Micro Devices (AMD): DOWN 7.8%
6. Marvell Technology (MRVL): DOWN 21.7%

The Portfolio was UP 6.8% in August and is now UP 26% YTD.

Portfolio Performance Chart

To my knowledge PortfoliosLab.com is the only site that enables an investor to create a chart of the performance of a portfolio and below is a chart snapshot of the portfolio's performance since the beginning of 2025.

(Click on image to enlarge)

Source: PortfoliosLab.com - the only site that enables an investor to create a chart of a portfolio, not just an individual stock or ETF. Go here to create your own portfolio chart. The steps are clear so it's fast and easy. 

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