AI is the future.
And this is coming from someone who is very old-school. I still research and write by reading SEC filings, then typing word for word.
However, after seeing how AI applications have benefited my existing businesses (SE, MELI, PME, ISRG, WTC, VEEV, FTNT, CRWD, to name a few) over the past few quarters, I went for a hunt for dominant businesses in the semiconductor supply chain.
On a more personal level, although I know the benefit of AI for research and writing, I still don't use it as much as I should (maybe 5% of this 10K word is from AI?). I could be wrong but newsletters with real human connections and human opinion may do well. Particularly, I very much enjoy the authentic interactions with many of you, some became my tennis friend, some I talk regularly on Zoom and some I exchanged long emails more thoughtful than one I write to my family. So please keep up the real conversations going behind the screen with me and enjoy your next two sleep well picks that will shape the future of AI.
It’s a long write-up (50-minute read).
The two Sleep Well Picks this time, 25th and 26th, are:
Besi Semiconductor (BESI, Euro 12B market cap) and
ASML (ASML, Euro 554B market cap).
I had some background knowledge, given that The VAT Group was the second Sleep Well Pick 4 years ago, in 2022, and I regret not buying it back then after selling out in 2023; link to the deep dive next if you want to revisit.
Besi and ASML are both further up the value chain than VAT Group so the technicals can be quite dry. So if they aren’t your cup of tea, recent picks (Intuitive Surgical, Pro Medicus) would be an easier digest. Both should continue to do well even if prices have gone up since I added them to the portfolio, but do recall I make mistakes, a huge mistake with SWI #22, but that’s also meant I am even more selective now a day.
Ok, let’s get started. ☕️
The semiconductor industry is central to an AI's future. It produces chips, power transistors, memory, and LEDs, the foundation of both the digital (AI models) and physical AI layers (Robots, Autonomous cars, etc.).
NVIDIA and Taiwan Semiconductor grab headlines, but their existence depends on chip designers, manufacturers (wafer fabrication equipment), and service providers. To appreciate the industry's intricacies, key players, we need to understand the entire ecosystem.
I’ll start this deep dive by
Explaining the industry value chain
Design
Fabrication - ‘500 steps in 6’
Highlighting the core players
5 core players (ASML, KLA, TEL, LAM, AMAT)
Diving deep into Besi
Sleep well ingredients (moats, management, Applied Materials)
Risks (ASML, HBM delays, China’s self-sufficiency)
Diving deep into ASML
Valuation
Sleep Well Scorecard