3 Mutual Funds Riding the Semiconductor Boom

Hello investors, and welcome back to the Equitymaster channel.

I'm Mitali Dhoke, Research Analyst, here to simplify mutual fund investing and guide you on a smarter wealth creation journey.

Let me ask you a simple question.

What is common between your smartphone, electric vehicles, satellites, cloud computing, data centres, and now even artificial intelligence?

It's semiconductors - chips.

Today, chips are not just a technology product. They've become the backbone of the global economy.

Many experts now say data is the new oil. But semiconductors are the engines that run it.

The world realised this very clearly during the 2020 to 2022 period.

You probably remember that phase.

Car waiting periods stretched to six months, sometimes even a year. Electronics prices went up. Laptop deliveries were delayed. Even basic appliances were hard to get.

The reason wasn't shortage of labour or shortage of demand.

It was shortage of semiconductor chips.

Automobile factories had to stop production. Manufacturers couldn't complete products because even a tiny missing chip made the entire machine unusable.

That period changed how governments and industries think.

Countries like the US, China, Europe, Japan, and now India realised something very important:

If you don't control chip manufacturing, you don't control your economic future.

And that is why massive investments are now happening globally to build semiconductor supply chains.

As we move towards 2026, this isn't just a short-term rally.

We're actually in the early phase of a structural expansion cycle.

Demand for advanced chips is coming from multiple areas at the same time - artificial intelligence, 5G networks, robotics, electric vehicles, cloud computing, and high-performance computing.

AI models are becoming larger and more complex.

Every AI server, every data centre, every advanced digital system requires powerful GPUs and specialised chips.

That's why many analysts now call semiconductors the infrastructure of the digital world.

Now here's the challenge for Indian investors.

Directly investing in global semiconductor companies isn't easy. And picking individual stocks in such a cyclical and technical industry carries risk.

But there is a smarter approach.

Instead of selecting individual stocks, investors may participate through mutual funds that benefit from the broader semiconductor ecosystem.

Some funds invest in infrastructure, engineering systems, electronics manufacturing, telecom networks, and industrial manufacturing - all of which benefit when semiconductor investments increase.

Today, we'll discuss three such mutual funds.

Disclaimer: This video up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns.

Let's start with the first one.

The Canara Rob Infrastructure Fund.

Launched in 2005, this fund focuses on India's long-term infrastructure growth story.

Think about semiconductor manufacturing.

It's not just about making chips inside a factory.

A chip fabrication unit requires uninterrupted power, ultra-pure water supply, logistics networks, specialised engineering, industrial parks, and precision manufacturing ecosystems.

When India builds semiconductor fabs and packaging units, infrastructure companies benefit first.

This fund follows a bottom-up stock selection approach.

Instead of chasing momentum, it focuses on businesses involved in construction, cement, engineering, industrial manufacturing, and utilities.

Because of this approach, it has shown strong performance across market phases and resilience during volatility.

As India increases capital expenditure in roads, railways, power, manufacturing, and semiconductor facilities, this fund stands to benefit from multiple growth drivers.

In simple terms, it's a way to invest in India's broader economic development cycle.

The second fund is the HSBC Infrastructure Fund.

This fund also focuses on infrastructure, but its strategy is slightly different.

It combines stability and growth.

It maintains exposure to established large infrastructure companies for stability, while also investing in mid-cap engineering and manufacturing companies for growth potential.

This is often called a barbell approach - one side offers stability, the other growth.

Semiconductor expansion boosts telecom networks, electricity demand, electronics manufacturing, and industrial equipment.

As India pushes its semiconductor mission, companies involved in power, telecom, and industrial engineering may see increased demand.

This fund indirectly participates in that ecosystem while remaining diversified across infrastructure sectors.

It is essentially a long-term play on India upgrading itself into a manufacturing economy.

Now let's look at the third fund.

The Motilal Oswal Flexi Cap Fund.

This is not a pure infrastructure fund.

It's a flexi cap fund, meaning it can invest across large-cap, mid-cap, and emerging companies.

The fund follows a high-conviction strategy.

Instead of holding too many stocks, it invests in selected businesses with strong growth visibility, good management quality, and long-term potential.

Here's how it connects to semiconductors.

The ecosystem includes IT services, electronics manufacturing services, automation, digital engineering, specialised components, and high-end manufacturing.

Many companies in these sectors indirectly benefit from semiconductor growth.

This fund selectively invests in such sectors.

So while it isn't a thematic semiconductor fund, it captures the broader opportunity created by digitalisation and advanced manufacturing.

That makes it a more diversified way to participate in the trend.

Now, as an investor, there's something important to understand.

The semiconductor industry is at a turning point.

Demand is rising because the world is becoming increasingly digital.

AI, automation, smart devices, EVs, and cloud computing are long-term structural shifts.

At the same time, countries are diversifying chip production to prevent supply disruptions.

For India, this decade could be the foundation phase of its semiconductor ecosystem.

But this will take time.

And the opportunity is broad - infrastructure, engineering, power, telecom, manufacturing, IT services, electronics assembly.

At the same time, this theme is cyclical.

Semiconductors won't move in a straight line.

There will be rallies. There will be corrections.

So this should not be treated as a quick-return idea.

It requires patience, staggered investment, and proper allocation.

The semiconductor story is real.

But participating through diversified mutual funds allows investors to benefit from the ecosystem while managing risk.

Think of it as a long-term structural opportunity - not a short-term trade.

Invest wisely.

Happy investing.

And if you found this video useful, share it with someone who thinks semiconductors are only about mobile phones - because they are actually about the future economy.