Semis Memo: Muscle Memory
Memory Test, Semicap Subsystems and Emerging Trades in the AI Semis Supply Chain
Introduction
There is a lot going on in AI and the semiconductor supply chain. Almost too much, it seems at times.
The wild performance in the most prominent players has reinforced the supply/demand balance we described in the idea “Post-Traumatic Supply Disorder” from our 26 Trades for 2026. Memory, storage, semicap, advanced packaging – these sectors have performed incredibly well over the past month.
We’ve also been reminded of something we have known for a while.
“While one has indeed so far been able to get away with an understanding that only goes GPU-deep in AI, I believe that will rapidly begin changing…
In the meantime, generalists are left to keep up with a rapidly advancing technological landscape in semiconductors that can easily leave you behind... The shame in that is that it often robs you of the ability to truly understand what’s behind the whole picture while ensuring you’re properly positioned – a picture which will only become increasingly important when these narratives take hold in the real world.”
-AI Phase Two, April 2025
In order to have caught the most asymmetric trades of the “AI Bubble”, you had to be paying attention to things that were a bit complex for a generalist. You also had to have a strong view on what would happen in the supply chain 6-12 months from now due to whatever was happening right now.
Some bad news: it is not going to get any easier from here. We can’t sit idly by while the expected returns from mainstream “layups” like Nvidia, Micron, SK Hynix, Broadcom etc. moderate.
That’s why we’ve hired some talented semiconductor analysts, so they can explain to us ignorant generalists what’s going on behind the Wall Street curtain (and we can then translate it back into thematic upside).
Our two newest team members, Zephyr and Jukan, add deep semiconductor knowledge to Citrini’s existing thematic and trading expertise. We’re going to combine our existing penchant for having strong, occasionally non-consensus views on what the continued proliferation of Artificial Intelligence looks like with their in-depth knowledge of the semiconductor supply chain.
We’ve navigated the opportunities in AI Data Centers, GPUs, Memory, Optical Interconnects, ASICs and more so far.
For example, for us to underwrite Teradyne (TER) and its robotics opportunity, we had to keep abreast of the tailwinds for players in memory testing. To recognize the opportunity in Amkor (AMKR), we needed to recognize the increasing demand for chiplet architectures and advanced packaging that would increase demand for OSAT (Outsourced Semiconductor Assembly and Testing, if you haven’t been paying attention). Going back even further, for us to make the call that SK Hynix and Micron would outperform in Q1 2024 (while they were languishing in the doldrums of the post-COVID RAM glut), we needed to understand the constraints HBM placed on the supply chain and the nature of truly agentic AI.
This is the first of our new “Semis Memo” series, where we’ll go a layer deeper on current trends in the infrastructure powering AI while also ensuring our audience doesn’t need to go get a PhD in semiconductor design to keep up. Consider this a tour around what we view as the most interesting, potentially overlooked opportunities in one of the hottest sectors on the planet.
Today, we’re covering some existing trends and the second-order winners of the Memory Supercycle, Semicap Subsystems and Silicon Photonics. We’ll also share some of our early thoughts on opportunities that should be on your watchlist, everything from SpaceX supply chain beneficiaries to opportunities arising from the AI-driven SaaS selloff. Finally, we close with a list of single name stories we think are worth keeping on your radar.