The semiconductor industry is notorious for its wild boom and bust cycles, with large fortunes made (or lost), depending on when you invested.
Intel’s (NASDAQ: INTC) recent earnings beat and optimistic chip demand forecast have helped put semiconductor stocks back in focus for investors.
In Singapore, AEM Holdings Limited (SGX: AWX) and Venture Corporation Limited (SGX: V03) are two primary stocks for semiconductor exposure.
Are these names still a buy here?
Understanding the Semiconductor Cycle
First, let’s shed some light on why the semiconductor industry is highly cyclical.
Demand for chips usually grows when there is economic growth (more demand for electronics) or technology advancements (think AI/cloud).
To meet this increase in demand, semiconductor companies generally increase the supply of chips. Traditionally, this leads to inventory build-up and overcapacity of chips.
When a slowdown in demand hits, chip inventories outweigh demand, leading to a decrease in the pricing of chips. Companies will then reduce chip production capacity while their inventories of chips get drawn down.
Finally, the whole cycle repeats itself when we see an economic recovery or a change in technology.
The key takeaway is that timing in the semiconductor industry matters, but predicting exact turning points is difficult.
Where Are We in the Cycle Today?
There have been some encouraging signs seen in the semiconductor industry: other than strong demand for AI-related chips, analog chips (chips that interact with the physical world and which tend to serve automotive and industrial use cases) are seeing signs of stabilisation.
Strong earnings and optimistic outlooks from leaders such as Intel and Texas Instruments (NASDAQ: TXN) confirm that chip demand remains high.
However, the conflict in the Middle East is creating supply chain risks and economic uncertainty that could weigh on the sector.
With possible higher inflation and softer purchasing power among consumers, the possible slowdown in demand for consumer electronics could also hurt chipmakers.
Company Overview: AEM vs Venture Corp
Of the two companies, AEM presents a purer play on the semiconductor industry. It provides testing solutions for semiconductors and electronics.
AEM has partnerships inked with leading global chipmakers, including Intel and ASE Technology Holding Co Ltd (TPE: 3711).
Historically, AEM’s business has been rather volatile given its single-customer concentration risk with Intel. But this has improved slightly in more recent years as AEM has expanded its customer base.
AEM’s stock price has been on an absolute tear, last trading at S$7.58, nearing the upper-end of its wide 52-week range (S$1.19 – S$8.36). Its results for 2025 partly explain this strong rally.
Although topline growth was tepid at 5%, the true story is seen in AEM’s bottom-line expansion: Net profit surged a staggering 47.8% to S$17.1 million, as the company ramps up manufacturing for its second AI/HPC (high-performance computing) customer. Operating margin also improved to 5.3%, from 2024’s 3.7%. Meanwhile, AEM’s return on equity (ROE) of 3.4% for 2025 is a marginal improvement from 2024’s 2.4%.
Crucially, operating cash flow (OCF) swung positive to S$133.6 million, with a healthy S$112.1 million in free cash flow (FCF), up from a negative figure in 2024. AEM used the increase in FCF to pay down a majority of its debt, leaving the balance sheet in a solid net cash position of S$61.0 million.
On the other hand, Venture Corp offers a more balanced exposure to semiconductors. It offers electronics manufacturing services to a wide variety of industries, including semiconductors, life sciences, and consumer electronics.
With a more diversified customer base across industries, Venture Corp has generated consistently positive earnings and cash flows through market cycles.
Venture Corp’s shares are currently trading at S$17.96 each, near the top of the annual range of S$10.92 – S$18.75.
In its latest set of results, which were for 2025, Venture Corp saw its revenue soften by 7.4% to S$2.5 billion, with net profit also declining by the same percentage to S$227 million. These numbers were the result of weakness in the company’s consumer technology segment. However, a bright spot is that operating margin inched up to 9.6% from 9.4% in 2024.
ROE did step down moderately to 8.0% from 2024’s 8.5%. However, the company still managed to generate positive free cash flow of S$226.3 million. Venture Corp’s balance sheet remains robust, with an excellent net cash position of S$1.3 billion.
The Bull Case: Why It Might Be Time to Buy
The rebound in demand for analog chips, alongside strong AI demand, has painted a constructive demand picture for semiconductors.
Both AEM and Venture Corp might see stronger earnings growth because of the supportive demand backdrop for semiconductors.
The Bear Case: Why Investors Should Be Cautious
However, investors should still consider the possible bear case facing semiconductors, where recovery in certain sub-segments (consumer electronics) may remain weak or take longer than expected to come to fruition.
AEM’s heavy reliance on a few key customers also presents a significant concentration risk.
Valuation: Are These Stocks Cheap Enough?
AEM looks expensive, with a forward price to earnings (P/E) ratio of 55.2x, nearly triple its five-year average of 19.5x, suggesting lofty growth expectations in the eyes of investors.
Meanwhile, Venture Corp trades at a forward P/E ratio of 21.5x, against its five-year average of 15.3x, possibly showing a turnaround priced in by investors.
Get Smart: Aggressive Growth or Defensive Value?
For investors comfortable with a more volatile name, albeit one with stronger prospects, AEM may be the better fit.
For investors who prize greater stability and dividends, consider having Venture Corp as your semiconductor exposure.
In sum, to invest in semiconductors, you have to be mindful of which part of the cycle we’re currently in.
Both AEM and Venture Corp offer exposure to the semiconductor sector, with the former being a more aggressive option and the latter a more conservative pick.
At the end of the day, the right fit for your portfolio depends on your risk profile and time horizon.
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Disclosure: Wilson.H does not own shares in any of the companies mentioned.
