On July 28, 2026, the global semiconductor market entered a new wave of enthusiasm. Driven by strong demand from AI, automotive electronics, and the Internet of Things, several chip giants recently reported Q2 earnings that exceeded market expectations, further strengthening investor confidence in the semiconductor sector. Why does the chip investment logic remain robust? This article will interpret from three dimensions: industry trends, technology barriers, and domestic substitution.

1. Dual drivers of AI and automotive electronics push industry into new growth cycle

According to the latest financial reports, leading companies such as Nvidia, TSMC, and Samsung Electronics all reported strong revenue growth. Among them, Nvidia's data center revenue doubled year-on-year, mainly driven by deployment demand for large language models and generative AI. At the same time, the automotive chip sector is also experiencing explosive growth, with orders for automotive-grade chips from suppliers like NXP and STMicroelectronics already scheduled through 2027. These data indicate that the semiconductor industry is emerging from cyclical fluctuations and entering a new growth cycle driven by technological application innovation.

1. AI chip demand continues to rise

With the surge in demand for large model training and inference, AI chips have become the strongest engine in the semiconductor market. According to the latest report from SEMI, the global AI chip market size is expected to exceed $150 billion in 2026, with year-on-year growth of over 40%. Not only GPU giants benefit, but emerging areas such as application-specific integrated circuits (ASICs) and compute-in-memory chips are also favored by capital.

2. Automotive electrification accelerates

Smart cars are increasingly dependent on chips. New energy vehicle makers represented by Tesla have already used over 3,000 chips per vehicle. In addition, the improvement of autonomous driving levels drives demand for high-performance sensor chips and computing chips. According to data from the China Association of Automobile Manufacturers, sales of new energy vehicles grew 35% year-on-year in the first half of 2026, driving simultaneous expansion of the automotive-grade chip market.

2. High technology barriers, broad space for domestic substitution

The chip industry has extremely high technology barriers and capital thresholds. Advanced process chip manufacturing is currently only in the hands of a few companies like TSMC, Samsung, and Intel with sub-3nm processes. However, geopolitical factors are prompting countries to accelerate localization. China has achieved rapid breakthroughs in mature process nodes, with the share of 28nm and above process capacity continuing to rise. The self-sufficiency rate of domestic equipment and materials has also increased from less than 10% in 2020 to about 25% in 2026.

Three major opportunities for domestic substitution

  • Policy support: The third phase of the National Integrated Circuit Industry Investment Fund was launched in 2026 with a scale of over 300 billion yuan, focusing on advanced manufacturing, packaging and testing, and key materials.
  • Market demand: China is the world's largest chip consumer market, with annual imports exceeding $300 billion, leaving huge room for local substitution.
  • Technology breakthroughs: SMIC has improved the yield rate of its 14nm process to over 95%, and HiSilicon has made significant progress in EDA tools and RISC-V architecture.

3. Long-term growth logic: digitalization and intelligence are irreversible

In the long run, semiconductors are the cornerstone of the modern economy. Any digital or intelligent application relies on chips. Whether it is 5G/6G communications, cloud computing, edge computing, or frontier technologies like brain-computer interfaces and quantum computing, the underlying layer is semiconductor devices. Therefore, the long-term growth logic of the chip industry is clear. Investors can focus on the following areas:

  • Advanced packaging: Such as 3D packaging and Chiplet technology, improving system integration and reducing process dependency.
  • Power semiconductors: Third-generation semiconductors like SiC and GaN are growing rapidly in new energy and power grid applications.
  • Semiconductor equipment: Domestic substitution space is huge for etching machines, thin-film deposition equipment, etc.

Conclusion

On July 28, 2026, the strong performance of the semiconductor sector once again confirmed the long-term value of chip investment. Despite short-term inventory adjustments and geopolitical risks, driven by rigid demand from AI, automotive electronics, etc., the industry boom is expected to remain high. For investors, grasping technology trends and focusing on leaders in domestic substitution may be the core strategy for positioning in the chip sector.