Singapore's semiconductor stocks: Customers' results point to an opportunity in the selloff

The selloff began in mid-October as faster US inflation lifted bets on further Federal Reserve hikes and AI funding concerns resurfaced. It deepened on 30 October after Alphabet's record one-day fall and Intel's weak guidance, and again this week after the US midterm elections.

The three companies' own 3Q26 figures are not yet available, but most of their key customers have reported. We use these results as a read-through to demand rather than a direct measure of orders, as customer shares are not fully disclosed. For Applied Materials, which reports on 12 November, we use its guidance for fiscal 4Q26, which ended on 25 October 2026.

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Key customers: strong demand, with Intel the main exception

Table 1: Latest results of key customers

Customer	Customer of	Latest revenue	Most relevant measure	Latest quarter guidance
AMD	AEM (understood to be its fabless AI/HPC customer)	USD 13.4 billion (+45% YoY)	Data Center: USD 8.5 billion (+97% YoY)	About USD 17 billion, ±3%
Intel	AEM (PC/Foundry customer)	USD 16.5 billion (+21% YoY)	DCAI: USD 7.3 billion (+78% YoY)	USD 15 billion to USD 16 billion
ASE Technology	AEM (strategic partner)	NTD 244.2 billion (+45% YoY)	Testing: NTD 26.3 billion (+43% YoY)	ATM revenue +11% to +13% QoQ
Applied Materials	UMS (key customer)	Reports on 12 November	Guided Semiconductor Systems for Fiscal 4Q26 (to 25 Oct 2026): about USD 7.9 billion (+12% QoQ)	Guided Fiscal 4Q26 (to 25 Oct 2026) revenue USD 10.25 billion, ±USD 0.5 billion
Lam Research	UMS (understood to be its new major customer)	USD 8.22 billion (+54% YoY)	Memory at 46% of systems revenue	USD 8.6 billion, ±USD 0.4 billion
ASML	Frencken (key customer)	EUR 11.7 billion (+55% YoY)	Net system sales: EUR 8.4 billion (+51% YoY)	EUR 14.2 billion to EUR 15.2 billion
Source: Company earnings materials. Periods are 3Q26 or the quarter ended September 2026, unless stated.

UMS: the most direct read on equipment spending

Lam's outlook is the clearest positive. Its WFE forecast implies growth of about 30% in 2027 on our calculation, and customer visibility extends through 2028. Applied Materials' guidance points the same way. It guided fiscal 4Q26 (ended 25 October 2026) revenue to USD 10.25 billion, up about 51% YoY at the midpoint, with Semiconductor Systems revenue of about USD 7.9 billion. It is also further raising its 2026 Semiconductor Systems expectations and expects another strong growth year in 2027.

This demand meets a capacity constraint at UMS, where management has described near-term components capacity as tight. Its share placement should fund automation in Penang and a new factory in Vietnam, while 1H26 revenue from Malaysia and South Korea, the markets tied to its new major customer, rose 81.9% YoY.

Higher equipment spending may not reach UMS at the same pace, however. Lam's December-quarter guidance was held back as some component suppliers struggled to keep pace, with delayed shipments expected to move into the March quarter. This points to tight supply rather than weak demand.

With UMS’s own components capacity tight, we think it could be part of that bottleneck, although neither company has said so. If so, Lam’s higher spending would reach UMS only as fast as UMS adds capacity, making the timing of its Penang automation and Vietnam factory the key risk.

AEM: the highest growth, but the most mixed signals

AMD gives AEM the strongest support. It guided Data Center revenue up about 50% QoQ in 4Q26 and expects server revenue to double YoY in 2027, mostly on units and core counts and less so on ASPs. This matters because we think AEM’s test equipment demand depends more on chip volumes and test complexity than on selling prices. AEM has not disclosed how far its exposure extends to AMD's AI GPUs, however.

ASE adds a longer-dated opportunity, with testing revenue up 43% YoY and its ATM lines at or near full utilisation. No ASE-related revenue or backlog has been disclosed at AEM, so we treat this as upside rather than a forecast driver.

Intel is the main concern. Its 78% YoY DCAI revenue growth in 3Q26 came mainly from a 54% rise in server ASPs, driven by premium mix, while server volume rose only 10%. As think AEM’s demand depends more on chip volumes and test complexity than on selling prices, Intel’s revenue overstates the read-through. Client volume also fell 14%, and CCPG revenue is guided down more than 20% QoQ in 4Q26. As AEM's latest investor materials do not split its Intel business between server and client products, we cannot assume Intel's server strength insulates AEM.

Frencken: ASML offers support to a more diversified business

Frencken has a more diversified customer base than AEM and UMS, so we treat ASML's results as supporting evidence rather than a main driver. ASML's sales rose 55% YoY in 3Q26, and its ArFi lithography unit sales rose to 40 from 23 in 2Q26. Semiconductor equipment subsystems make up about 50% of Frencken's revenue.

Softer European Analytical Life Sciences demand kept 1H26 revenue flat. Thermo Fisher, another key customer, grew Analytical Instruments revenue about 6% YoY in 3Q26, but this global figure does not show that Frencken's European weakness has eased.

Overall, we view ASML’s strength to be supportive for Frencken’s semiconductor half. However, Frencken’s growth is likely to stay below AEM’s and UMS’s until European life-sciences demand recovers.

US midterms: a timing risk for data centres, not a demand risk for now

The midterm results add a policy risk that customer guidance has not fully tested. Democrats Gina Hinojosa and Keisha Lance Bottoms won the Texas and Georgia governorships after campaigning in part on data centre moratoriums. Texas accounts for about a quarter of US data centre capacity due by 2030, according to GLJ Research, while CBRE ranks Atlanta as the most active US data centre construction market.

We do not expect a broad, sharp slowdown. Most 2027 capacity is already under construction, decisions are split across city, county and state officials, and developers can move to other states. GLJ Research said projects with power, permits and steel should continue, while others could slip 12 to 18 months, move or not proceed. Much depends on how long any pause lasts: a conditional pause raises costs but keeps projects moving, while a pause until new legislation has no fixed end date.

We therefore see this mainly as a timing, location and cost risk rather than a change in AI computing demand. However, it matters for our names because delayed data centres could defer chip deployments, and eventually equipment orders. Hyperscalers' 2027 plans also predate the vote: Alphabet expects capex to increase significantly in 2027, Amazon expects to spend meaningfully more, and Microsoft expects capex to accelerate in the second half of its FY2027. Their next round of guidance will show whether those plans change.

Valuation: lower prices improve the entry point, not the risk

We leave our forecasts and target prices unchanged, so higher upside reflects lower share prices rather than a stronger thesis. Our forecasts do not assume any disruption from data centre moratoriums.

Table 2: Valuation after the selloff on 5 Nov 2026

	AEM	UMS	Frencken
Share price (SGD)	6.37	1.78	1.84
Change since 15 October update	-27.6%	-23.6%	-16.4%
iFAST rating	BUY	BUY (from HOLD)	Not rated
Target price (SGD)	10.93	2.54	-
Upside	71.6%	42.7%	-
Fair P/E on FY2028E EPS	25x	20x	-
EPS growth FY2026E / FY2027E / FY2028E	389.1% / 34.8% / 24.1%	72.2% / 29.1% / 22.0%	10.9% / 14.1% / 18.1% (consensus)
Consensus forward P/E	24.0x	22.4x	18.3x
Source: Bloomberg Finance L.P., iFAST. Share prices as of 5 November 2026.

• AEM (BUY, target price SGD 10.93) remains our preferred pick. We forecast about 29% annual EPS growth over FY2026–28, the fastest of the three, which supports a higher 71.6% upside. Intel’s weak outlook is the main risk to this view.
• UMS (BUY, upgraded from HOLD, target price SGD 2.54) now offers 42.7% upside, compared with 9.0% on 15 October. Our forecasts are unchanged, so the upgrade reflects the lower share price. Lam’s and Applied Materials’ outlooks support demand, but UMS’s growth depends on its placement-funded capacity in Penang and Vietnam coming online in time.
• Frencken (not rated) is the most diversified of the three in terms of customer base, but its slower expected growth means a lower multiple does not in itself make it cheaper.

Volatility is likely to persist, as Applied Materials’ results on 12 November and the companies’ own results could bring further swings. However, with 71.6% upside for AEM and 42.7% for UMS, we believe current prices more than compensate for that risk.

Table 3: Earnings table for AEM Holdings

	FY25A	FY26E	FY27E	FY28E
P/E ratio (x)	32.2	24.4	18.1	14.6
Earnings growth (%)	46.6%	389.1%	34.8%	24.1%
EPS (SGD)	0.0535	0.2614	0.3523	0.4373
Target price (SGD)				10.93
Current price (SGD)				6.37
Upside potential (%)				71.6%
Source: Company data, iFAST estimates. FY25A P/E is based on the share price at the end of FY2025; FY26E to FY28E are based on share prices as of 5 November 2026.

Table 4: Earnings table for UMS Integration

	FY25A	FY26E	FY27E	FY28E
P/E ratio (x)	24.3	22.1	17.1	14.0
Earnings growth (%)	2.6%	72.2%	29.1%	22.0%
EPS (SGD)	0.047	0.081	0.104	0.127
Target price (SGD)				2.54
Current price (SGD)				1.78
Upside potential (%)				42.7%
Source: Company data, iFAST estimates. FY25A P/E is based on the share price at the end of FY2025; FY26E to FY28E are based on share prices as of 5 November 2026.

Figure 1: AEM share price vs EPS chart