Photo by Steve Johnson on Unsplash

Introduction

The AI hardware (aka semiconductor/computer chip/wafer) segment consists of hundreds of companies, big and small, in 7 distinct sub-segments, each with its own unique dynamics and growth trajectories and the rally i’s not just hype—it’s a convergence of strategic breakthroughs, policy shifts, and investor enthusiasm.

Ranking Of the 7 Sub-Segments Of the AI Hardware (Semiconductor) Segment
 

Each of the sub-segments are ranked below as to their stock performances so far in July (i.e. MTD), in descending order, and YTD with any major reasons why along with their constituents.

1. The Pure-Play EDA Software Chip Design Sub-Segment: UP 8.9% MTD; UP 12.0% YTD
   • Focus: design of complex semiconductor chips using sophisticated electronic design automation (EDA) software
   • Constituents: Cadence Design Systems (CDNS) and Synopsys (SNPS).
   • Reasons for Price Change:
     • U.S.-China Trade Breakthrough: On July 2, the U.S. government lifted export restrictions on chip design software to China, reversing a ban imposed in May as part of a broader trade agreement in which China agreed to ease curbs on rare earth exports. With restrictions lifted, companies like Synopsys and Cadence can now resume unrestricted sales and support of their EDA tools to its Chinese customers who account for 12–16% of their revenue.
2. The Integrated Device Manufacturer (IDM) Sub-Segment: UP 4.5% MTD; UP 20.2% YTD
   • Focus: companies do everything themselves in house to control the entire production process.
   • Constituents: Analog Devices (ADI); Infineon Technologies (IFNNY); Intel Corp. (INTC);  Microchip Technology   (MCHP); Micron Technology (MU); NXP Semiconductors (NXPI);  STMicroelectronics (STM); and Texas Instruments    (TXN). 
   • Reasons for Price Change: 
     • AI Infrastructure Demand: IDMs are critical suppliers of analog chips, power management ICs, and embedded processors—all essential for AI data centers and edge computing. As AI adoption accelerates, demand for these components is surging.
3. The Pure-Play Quantum Computing Sub-Segment: UP 4.3% MTD; UP 5.2% YTD
   • Focus: involved exclusively in the research and development of quantum computers.
   • Constituents: D-Wave Computing (QBTS); IonQ (IONQ); Quantum Computing Inc. (QUBT); and Rigetti Computing   (RGTI).
   • Reasons for Price Change:
     • Breakthroughs & Partnerships:
       • IonQ announced a $1.1 billion acquisition of Oxford Ionics and new partnerships with Toyota Tsusho and Intellian, boosting its trapped-ion tech and quantum networking ambitions,
       • D-Wave reported a 509% YoY revenue jump, driven by system sales and real-world adoption, including a deal with Julich Supercomputing Center.
       • Quantum Computing Inc. released a mid-year update highlighting progress in photonic qubit development, which offers scalability advantages.
       • Rigetti Computing secured a $250 million partnership with Quanta and raised $350 million in equity capital, giving it over $575 million in cash and zero debt—a strong financial position for scaling operations.
4. The Pure-Play Semiconductor Supplier Sub-Segment: UP 3.2% MTD; UP 27.6% YTD
   • Focus: provide essential equipment for manufacturing chips such as lithography machines, etching, test and packaging equipment, automation and inspection systems and production materials such as chemicals, gases, wafers and packaging
   • Constituents: Applied Materials (AMAT); ASML Holding (ASML); Entegris (ENTG);  KLAC Corp. (KLAC); and Lam Research (LRCX).
   • Reasons for Price Change: Global Demand & Supply Chain Normalization:
     • Equipment suppliers are seeing renewed order flows as chip inventories stabilize and demand rebounds and benefiting from normalized lead times and capacity expansion projects. in addition, with hyperscalers like Google, Amazon, and Meta developing proprietary AI chips, demand for cutting-edge equipment is accelerating.
5. The Pure-Play Semiconductor Foundries Sub-Segment: UP 2.0% MTD; UP 8.7% YTD
   • Focus: factories (called foundries in semiconductor jargon) concentrate all their efforts in the manufacture of chips based on the designs provided by other semiconductor companies.
   • Constituents: GlobalFoundries (GFS); Taiwan Semiconductor (TSM); Tower Semiconductor  (TSEM); and United Microelectronics (UMC).
   • Reasons for Price Change: Reduction in Geopolitical Risk:
     • A July 2 U.S.-China trade agreement eased export restrictions on semiconductor tools and materials, restoring access to key markets for foundries with global exposure reducing geopolitical risk and boosting investor confidence in long-term revenue stability.
6. The Pure-Play Outsourced Semiconductor Assembly and Test Sub-Segment: UP 1.7% MTD; UP 10.8% YTD
   • Focus: assemble chips into finished semiconductor components, tests for defects and do the very specialized packaging of the chips for shipping.
   • Constituents: Amkor Technology (AMKR) and ASE Technology (ASX).
   • Reasons for Price Change:
     • Tech Innovation: ​​​​​
       • ASE Technology introduced its FOCoS-Bridge with TSV, a next-gen packaging solution that reduces power loss threefold—reinforcing its leadership in advanced packaging and expanded its partnership with Ainos to deploy AI-powered scent detection systems, showcasing a commitment to smart manufacturing and ESG innovation
       • Amkor Technology broke through key resistance levels in mid-June, triggering momentum buying that spilled into July.
7. The Pure-Play Fabless Semiconductor Companies Sub-Segment: UP 0.6% MTD; UP 15.6% YTD
   • Focus: manufacturers design and sell hardware devices and semiconductor chips themselves while outsourcing their fabrication (i.e. are fabless) to a specialized manufacturer.
   • Constituents: Advanced Micro Devices (AMD);  Broadcom (AVGO); Marvell (MRVL); Monolithic Power   (MPWR);  Nvidia (NVDA);  and Qualcomm (QCOM).
   • Reasons for Price Change:
     • ​​​​​​​​​​​​​​Nvidia and AMD unveiled new GPUs and accelerators tailored for data centers and edge computing.
     • Qualcomm announced new automotive and IoT partnerships, expanding its reach beyond mobile.
     • Marvell and Monolithic Power are gaining traction in AI infrastructure and power management, key areas for next-gen chip deployments.

Summary

On average, the 31 constituents in the above 7 sub-segments are UP 3.5%, on average, MTD and are UP 17.0% YTD, reflecting a shift toward AI-driven infrastructure and strategic independence.

Please note: Hyperscalers such as Google, Amazon, Meta, and Microsoft are developing and deploying their own proprietary AI chips to optimize costs, enhance performance, and reduce reliance on third-party suppliers, signaling a potential fragmentation of the market and a shift towards more integrated, ecosystem-specific solutions. These hyperscalers are not presented in a portfolio of their own as the companies are not exclusively AI hardware operations, but their major contributions to the research, development, and deployment of AI chips are hereby acknowledged.

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