A Major Revaluation of the Semiconductor Industry: Has Even NVIDIA Lost Its Luster?

Shifting Market Dynamics

In recent years, a prevailing sentiment in global capital markets has been that betting on artificial intelligence (AI) is synonymous with betting on NVIDIA (英伟达). As the driving force behind innovations from ChatGPT to autonomous driving, NVIDIA's stock soared over eightfold in just three years. However, a seismic shift appears to have begun in February 2026 when the company reported a staggering revenue of $68.1 billion for the quarter, a 73% year-on-year increase. Despite this impressive performance, its market capitalization plummeted by $260 billion within two days. Meanwhile, companies involved in chip manufacturing equipment, such as Applied Materials and ASML, saw their stock prices surge, signaling a potential revaluation in the semiconductor industry.

The Emergence of the HALO Framework

This divergence in stock performance points to a new valuation framework emerging in the semiconductor industry known as "HALO," an acronym for "Heavy Assets, Low Obsolescence." First introduced by investment advisor Josh Brown in early February 2026, HALO has since been adopted by major financial institutions like Morgan Stanley and Goldman Sachs. The HALO framework emphasizes the importance of tangible, high-cost, and long-lasting assets that are less susceptible to obsolescence. As geopolitical tensions rise and interest rates increase, markets are reassessing the value of scarcity and the physical capabilities that underpin AI technology, shifting capital toward sectors that AI cannot easily disrupt.

The HALO Investment Logic

The HALO investment logic is particularly relevant in the context of the semiconductor supply chain, where companies that design chips are facing sell-offs while those that manufacture chips are being sought after. As AI technology progresses, its impact on the software industry raises concerns about the sustainability of business models reliant on software and data services. Moreover, doubts about the growth sustainability of AI hardware suppliers like NVIDIA have emerged, as their fortunes are closely tied to the capital expenditures of large cloud computing clients. This scenario has led to a significant capital rotation towards traditional sectors characterized by heavy assets, including industrial and energy companies.

Opportunities for Chinese Semiconductor Firms

For China's semiconductor industry, the HALO theme resonates with the trend toward domestic production, creating dual drivers for asset appreciation. As the global supply chain undergoes restructuring, ensuring industry chain security becomes a strategic priority, thus providing opportunities for local equipment and materials firms. Companies like North Huachuang and Zhongwei are expected to benefit as domestic demand for semiconductor manufacturing grows. Furthermore, Chinese firms in advanced packaging, such as Changdian Technology and Tongfu Microelectronics, have begun to capture significant market shares, positioning themselves favorably as the demand for local and secure supply chains escalates.

Conclusion

The core premise of the HALO framework is straightforward: as AI capabilities grow, assets that can be easily supplanted by AI diminish in value, while those that are harder to replace become increasingly scarce. In the semiconductor sector, this logic is redefining value distribution across the supply chain. As software barriers to competition weaken, the physical barriers of manufacturing equipment, materials, and advanced packaging capabilities remain intact, assuring their scarcity. As global capital reassesses the worth of heavy assets, Chinese companies that focus on building robust manufacturing capabilities and overcoming technological hurdles stand to gain significant valuation boosts in the coming years.