The article compares semiconductor equipment makers (ASML, Applied Materials) versus chip designers (Nvidia, Broadcom) in the AI boom. While equipment makers have outperformed over the past year, chip designers have higher profit margins (75-77% vs 50-54%) and greater pricing power, giving them a long-term advantage in capitalizing on the AI cycle despite massive capex investments expected to exceed $1 trillion next year.
Axe note: Chip designers show more pricing power than equipment makers despite the latter’s strong AI-driven demand.