New sources of demand

AI remains the biggest driver of semiconductor growth today. But the next opportunity may be broader than many investors realize.

Hi, I'm Aidan Brandt, portfolio manager of the Fidelity Select Semiconductors Portfolio and the Fidelity Advisor Semiconductors Fund.

While AI continues to power growth, we're beginning to see other parts of the semiconductor market contribute as well. Industrial and power semiconductors have spent the last couple of years working through excess inventory, but we're now seeing signs of recovery. That's encouraging because these areas are tied to long-term trends like automation, electrification, and industrial modernization.

We're also seeing the benefits of investment spread across the semiconductor ecosystem. The data center buildout continues to support demand not only for AI accelerators, but also for memory, networking, connectivity, and power management technologies. At the same time, reshoring and domestic manufacturing initiatives are creating additional opportunities across the semiconductor supply chain.

That's one of the most encouraging developments in the industry today. AI remains the primary growth driver, but the story is becoming broader. We're seeing more end markets contribute to demand, from industrial and power semiconductors to the technologies supporting data center expansion and reshoring efforts. Taken together, those trends suggest a broader and potentially more durable growth story for the industry over the medium to long term.