Portfolio Update: The SG Semiconductor Invasion (Time to Sell?)

It has been an amazing run for semiconductor stocks.

While I have zero exposure to the big names like Advanced Micro Devices (AMD), Intel (INTC), and Micron Technology (MU), these smaller Singapore-listed players in my portfolio are having a blast in the local party.

As of May 14, 2026, here is the Year-to-Date (YTD) return* of my “local heroes”:

• AEM Holdings (AWX): +476%
• Micro-Mechanics Holdings (5DD): +138%
• UMS Integration (558): +160%
• Venture Corporation (V03): +20%

*Based on 14 May’s closing prices.

Due to these strong performances, all of them are in my top 10 holdings now.

If you also own these stocks, you might be wondering: “Is it time to take profits?”

While I can’t advise you on your happy “problem”, let me share how I’m navigating mine.

Ignore the Purchased Price, Think Forward

It’s psychologically tough to ignore a triple-digit percentage gain, but anchoring to a low average purchase price will cloud your investment logic.

Look, I’m not against taking profits.

In fact, just two months ago I trimmed 30% of my AEM holdings at around S$3.

Dumb dumb, right? But I’m not berating myself over selling early.

Back then, the partnership with ASE Technology (ASX) wasn’t announced yet, and their new growth roadmap was only released during the AGM.

With this new realisation of the scale of growth potential, I have held on to my remaining shares despite them surging another three-fold in less than two months.

By all means take money off the table, but it shouldn’t be just to “cover the capital”. Your capital is whatever the position is worth today.

Your decision should be based on future business potential, current valuation, and downside risk.

1Q 2026 Business Update

What stood out must be AEM’s triple-digit growth in net profit, but this is primarily due to the low base in 1Q 2025. However, the sequential (QOQ) improvement is what truly signals momentum.

While Venture’s numbers are uninspiring, management has guided for an improvement in the coming quarters.

Unlike the other three, Venture’s more diverse business means the semiconductor boost will impact its overall results less. This isn’t necessarily bad; you will see why later.

The four companies are at different phases of delivery, but one thing is clear: there is real, tangible demand.

Too Expensive? Looking at Forward Valuations

Has the price run ahead of fundamentals?

Yes and no.

In the short term (FY 2026), valuations look steep. It’s clear that the “easy money” from the initial cyclical turnaround has been made.

However, if we assume sales growth continues into FY 2027 (20% for AEM, Micro-Mechanics, and UMS, and 10% for Venture) and factor in operating leverage (a ~1% margin expansion), the numbers become more palatable.

If demand still outstrips supply in FY 2028 and beyond, there is likely more upside ahead.

Operating leverage: As these firms hit optimal capacity, fixed costs are spread thinner, allowing profit to outpace revenue growth.

2022 Supply Glut: Will History Repeat?

That’s the bull case, but we all know semiconductors are notoriously cyclical.

Those of us who lived through 2022 remember the “cliff drop” when the post-pandemic supply glut hit. The drop in profits can be devastating.

Remember Venture?

Its diverse business, which resulted in less upside during the boom, helps significantly reduce the impact during a down cycle.

Same Same but Different?

Eventually, supply will catch up with demand, resulting in a down cycle. However, each cycle has a different duration and driver:

• 2022 Glut: Driven by a temporary surge in consumer electronics (PCs/tablets). Markets took a long time to digest that excess inventory.
  
• Now (The AI Supercycle): Demand is structural. AI chips and packaging are more complex, requiring longer test times. This cycle is about building infrastructure we don’t have yet, rather than just overstocking gadgets.

At the company level, business models have matured:

• AEM: No longer dependent on one customer; they now have five growth pillars, including HPC, Memory and ASICs.
  
• UMS: Has built another growth path through their “New Major Customer” in the foundry space.
  
• Micro-Mechanics: Their Wafer Fabrication Equipment (WFE) segment is gaining traction, complementing their tools and parts business.

The impact of the next down cycle is likely to be more muted than in 2022.

Exposure to Downside Risk: Position Size

Predicting exactly when a cycle turns is as futile as timing the market.

What is within your control is reducing the potential downside through position sizing.

Despite the phenomenal performance and my increased stakes in Micro-Mechanics, UMS and Venture, none of these stocks contribute more than 8% of my portfolio.

This means I’m not losing sleep over the end of the up-cycle. If a “black swan” causes a 40% crash, it will be a painful loss, but not fatal to my portfolio.

What’s Next? Monitor and Prepare for Increased Volatility

I have completed my buying and selling this round.

For now, I’m comfortable letting each stock run up to 12% (or perhaps 15%) of the total portfolio, with a 30% cap at the sector level. Note that these aren’t hard targets, but strategic guideposts to trigger a re-evaluation.

Finally, with current prices already baking in much of the future growth, I’m mentally prepared for increased volatility.

I expect some healthy “breathers” in the share price and plan to sit through that volatility. On the flip side, if the momentum continues to carry a position beyond my risk limits, I’ll have to stay disciplined and trim again.

Enjoy the party, but keep one eye on the exit door.

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