What to Buy in Semi Downcycle (2)? – NVIDIA vs. ASIC Plays?

In the previous article, I talked about which stocks one could consider buying during the semiconductor downcycle (What to Buy in Semi Downcycle? – An Introduction to TSMC N2 & A16/A14 Beneficiary Plays). Today’s article continues from the previous one and discusses whether one should buy NVIDIA or ASIC-related plays if he or she currently look to bottom-fish AI plays.

First of all, let's make one thing clear: there are differing opinions among investors regarding the prospects of AI. If you believe AI investment is just a bubble and that this is the beginning of its burst, then there's no need to read further from here. I personally believe that the demand for computing power driven by AI applications will continue to grow (please refer to my previous article: What’s Going on in China AI? Deepseek, Manus, and their Impact on NVIDIA (NVDA US) Demand). What we’re seeing now is merely a short-term correction in the supply chain due to previous overbooking, which is a normal phenomenon in cyclical industries like semiconductors and hardware. We can take advantage of this short-term correction to buy into our favored companies.

To start with the conclusion: I believe that at this stage, bottom-fishing ASIC plays is better than buying NVIDIA stock. This is not because ASIC chips are already on par with NVIDIA's GPGPU in terms of performance, but because I think NVIDIA's earnings in the second half of this year, especially in 3Q25, may still face significant downside risk. It’s not too late to buy NVIDIA stock after its earnings risk has been fully de-risked at that time.

Let me present my analysis in details below: