Eliza Wong
Executive Summary
- Goldman Sachs upgrades VeriSilicon (芯原股份) target price to RMB 220, citing AI order-driven growth momentum
- Micron Technology halts all memory chip quotations for one week, anticipating 20-30% price increases
- AI applications and data center demand creating structural supply shortages in semiconductor markets
- Industry consolidation accelerates as VeriSilicon acquires RISC-V IP provider Nuclei Technology (芯来科技)
- Memory chip pricing recovery expected to continue through 2026 according to Morgan Stanley analysis
Semiconductor Markets Ignite Amid Dual Catalysts
Global semiconductor investors received twin positive shocks this week as both equity valuations and memory chip prices surged simultaneously. The semiconductor sector surge appears driven by fundamental demand shifts rather than speculative activity, with AI applications creating unprecedented demand for both processing power and storage capacity. This convergence of factors suggests we may be witnessing the beginning of a sustained upward cycle rather than temporary market optimism.
Chinese semiconductor stocks particularly benefited from these developments, with the CSI Semiconductor Index gaining 5.3% in Thursday trading. The semiconductor sector surge has been particularly pronounced in AI-related companies, reflecting growing recognition that artificial intelligence requires both specialized processors and massive memory capacity. This represents a structural shift in computing architecture that favors companies with exposure to both segments.
Goldman Sachs Bullish Revision
Goldman Sachs analyst Mark Li (李马克) announced a significant target price increase for VeriSilicon (芯原股份) from RMB 193 to RMB 220 while maintaining a Buy rating. The upgrade reflects what the investment bank characterizes as “AI order-driven sustained strong growth momentum.” This semiconductor sector surge in analyst confidence comes despite near-term profitability challenges, with Goldman expecting a RMB 18 million net loss for 2025 due to elevated research and development spending.
The core driver behind this optimism stems from VeriSilicon’s remarkable order growth. Between early July and mid-September, the company recorded an 86% year-over-year increase in new orders, pushing its order backlog to RMB 3 billion. Critically, 64% of these orders originated from AI computing segments, providing strong visibility into future revenue streams. This semiconductor sector surge in order volume demonstrates how quickly AI applications are translating into concrete business for chip designers.
VeriSilicon Strategic Positioning
VeriSilicon’s strategic moves extend beyond organic growth through order acquisition. The company announced plans to acquire 97.007% of RISC-V IP provider Nuclei Technology (芯来科技) through a combination of stock and cash payments. This acquisition aims to address a critical gap in VeriSilicon’s CPU IP portfolio while enhancing its AI ASIC business design flexibility and market competitiveness.
The semiconductor sector surge isn’t limited to financial metrics. VeriSilicon’s stock price responded dramatically to these developments, hitting the 20% daily limit-up on September 12th to close at RMB 183.6 per share. This represented a new all-time high and brought year-to-date gains to an astonishing 250.18%, with market capitalization reaching RMB 96.521 billion. Such performance underscores how the semiconductor sector surge is creating tremendous shareholder value for well-positioned companies.
Financial Projections Revised
Goldman Sachs employed a 2029 46x P/E discount valuation methodology for VeriSilicon, resulting in the RMB 220 target price that implies nearly 20% upside from current levels. The investment bank slightly raised annual revenue projections for 2027-2030, reflecting improved expectations for AI-related chip design services and semiconductor IP revenue.
Profitability metrics also received upward revisions, with gross margins expected to improve by 1-2 percentage points in 2029-2030. Operating and net profit margins are projected to reach 28-30% and 26-29% respectively, indicating systematic improvement in earnings quality. This semiconductor sector surge in profitability expectations reflects both operating leverage from scale and pricing power in specialized segments.
Memory Chip Supply Crisis Emerges
Parallel to equity valuation increases, physical memory markets experienced supply shocks that could significantly impact global electronics production. Micron Technology, one of the world’s three largest memory chip manufacturers, notified customers that it would suspend all product quotations for one week across DDR4, DDR5, LPDDR4, and LPDDR5 product lines.
Industry sources indicate price increases of 20-30% are likely when quotations resume, with automotive electronics potentially facing 70% increases. This semiconductor sector surge in memory pricing follows similar moves by SanDisk, which recently announced price increases exceeding 10%. The simultaneous moves by multiple manufacturers suggest coordinated industry response to supply constraints.
Structural Supply-Demand Imbalance
The memory chip price increases stem from fundamental supply-demand dynamics rather than temporary market disruptions. Demand-side factors include AI application expansion, data center build-outs, and recovering consumer electronics markets. Supply-side constraints result from years of conservative capital investment by major manufacturers following previous industry downturns.
According to CFM Flash Market research, global memory chip prices may experience widespread increases in the fourth quarter, setting the tone for spring 2024 market trends. The DRAM price index has already increased approximately 72% over the past six months, indicating the semiconductor sector surge began well before recent announcements.
AI Driving Paradigm Shift
Artificial intelligence applications are reshaping semiconductor demand patterns in ways that extend beyond traditional computing cycles. AI servers require 3-5 times more memory capacity than conventional servers, creating disproportionate demand growth for high-performance memory chips. Chinese internet giants have significantly increased capital expenditures to support AI initiatives, further boosting enterprise storage demand.
The semiconductor sector surge reflects this fundamental shift toward AI-optimized computing architectures. Major manufacturers have shifted capacity from traditional products to premium segments, creating supply tightness across broader markets. This represents a permanent rather than cyclical change in industry dynamics, suggesting sustained pricing power for memory producers.
Analyst Consensus Building
Morgan Stanley reinforced the positive outlook in its latest report, indicating NAND prices will likely continue rising in the fourth quarter, particularly in enterprise segments. The investment bank expects favorable conditions to persist through 2026, providing unprecedented visibility into memory chip profitability. This semiconductor sector surge in analyst confidence reflects recognition that current supply constraints cannot be quickly resolved through capacity expansion.
Zheshang Securities analysts note that price increases represent inevitable results of storage industry demand recovery: supply-demand rebalancing pushes prices higher, technological iteration reshapes product value, and AI with edge computing creates new industry demand. The semiconductor sector surge thus combines cyclical recovery with structural transformation.
Investment Implications and Market Outlook
The concurrent equity valuation increases and memory price surges create unique opportunities for semiconductor investors. Companies with exposure to both AI processing and memory segments appear particularly well-positioned to benefit from current trends. The semiconductor sector surge likely has further room for expansion given continued AI adoption across industries.
For international investors, Chinese semiconductor companies offer attractive exposure to these trends while trading at valuations that may not fully reflect long-term growth potential. The semiconductor sector surge in China reflects both global technology trends and domestic policy support, creating a powerful investment thesis.
Strategic Considerations
Investors should focus on companies with demonstrated AI revenue streams, strong intellectual property portfolios, and exposure to memory markets. The semiconductor sector surge favors companies with pricing power and technological differentiation rather than undifferentiated manufacturers. Vertical integration and design capabilities become increasingly valuable in current market conditions.
Risk factors include potential inventory corrections, geopolitical tensions affecting technology transfers, and macroeconomic conditions impacting consumer electronics demand. However, the semiconductor sector surge appears fundamentally supported by AI-driven demand growth that should prove relatively resilient to economic cycles.
Navigating the New Semiconductor Landscape
The simultaneous analyst upgrades and memory price increases signal a profound shift in semiconductor industry dynamics. Companies positioned at the intersection of AI processing and memory technology stand to benefit disproportionately from current trends. The semiconductor sector surge represents both cyclical recovery and structural transformation, creating opportunities for informed investors.
As AI applications continue proliferating across industries, semiconductor demand should remain robust through multiple product cycles. Investors should maintain exposure to quality semiconductor companies while monitoring supply-demand dynamics across different product segments. The current semiconductor sector surge may represent just the beginning of a extended period of industry outperformance.
For ongoing coverage of semiconductor market developments and investment opportunities, subscribe to our research updates and market analysis reports. Professional investors should consider increasing allocation to semiconductor equities, particularly companies with verified AI revenue exposure and strong balance sheets to weather potential industry volatility.
