Live Markets: Don't put all your eggs in one basket, even if it screams AI!
02/05/2024 18:41
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DON'T PUT ALL YOUR EGGS IN ONE BASKET, EVEN IF IT SCREAMS AI!
The fanfare around the potential of artificial intelligence
has made the U.S. technology sector dizzyingly expensive,
leaving alternatives in emerging markets well positioned to
propel that momentum further.
Much of the optimism around AI has been U.S. centric and
revolving around names like Nvidia NVDA.O and Microsoft
MSFT.O . But those firms that play a crucial role in the AI
supply chain, particularly in emerging Asia, have been left out.
"Asian tech in particular is an area that's poised for
growth that we think is attractive," Chris Jackson, senior vice
president at UBS Wealth Management told Reuters in an interview
although he notes that a near term overhang for emerging markets
is the Fed delay in cutting rates.
Similarly, analysts at Pictet Asset Management classify
attractive opportunities in South Korea, Taiwan and China that
fall under various parts of the graphic processing unit (GPU)
supply chain.
U.S. chip designers like U.S. market-darling Nvidia NVDA.O
have most of their chips produced, packaged and embedded into
servers by Taiwan-based companies, with Taiwan Semiconductor
Manufacturing Co Ltd 2330.TW standing at the top of that list.
And as the AI market broadens, companies that manufacture
cheaper chips for Nvidia's U.S. competitors are expected to
benefit, given that the AI poster-child's products are expensive
and in limited supply, according to Pictet.
Alternatives to the chip industry leader's GPUs are
Application Specific Integrated Circuits (ASIC) powered servers,
namely those production by Taiwan's Alchip Technologies
3661.TW and Wiwynn Corp 6669.TW . ASIC chips offer cost
savings of around 10-20 per cent and delivery times are shorter.
The next phase of the boom is expected to be in the
AI-enhanced smartphone and computer hardware segments that could
benefit Asia-based hardware firms such as South Korea's Samsung
Electronics 005930.KS .
In its report Pictet cited an estimate for a compounded
annual growth rate of around 80% through to 2027 in unit sales
of AI enabled phones from analysts at Counterpoint Research and
KB Securities.
In terms of valuation, TSMC, Samsung and Wiwynn are trading
between 13.8x and 19.9x times their forward earnings compared
with valuations of around 27.5x for the S&P 500's information
technology sector's .SPLRCT and the Philadelphia SE
Semiconductor index .SOX , according to LSEG data.
"The upshot to all this is that investors have several
options through which to capitalise on the advance of AI.
Emerging Asian tech companies are among the most promising,"
said Chi Ho Wong, senior investment analyst at Pictet Asset
Management in a research note.
(Johann M Cherian)
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FOR THURSDAY'S EARLIER LIVE MARKETS POSTS:
SO WHAT HAPPENED IN APRIL? - CLICK HERE
THURSDAY DATA: PRELUDE TO PAYROLLS - CLICK HERE
WALL STREET EYES A DOVISH WAIT - CLICK HERE
U.S. INDEX FUTURES CLIMB EARLY AS INVESTORS DIGEST FED -
CLICK HERE
A BALANCING ACT TO LURE INFLOWS INTO UK EQUITIES - CLICK
HERE
THE UK HAS ITS PREMIUM STOCKS TOO! - CLICK HERE
POST-DATA PRICE ACTION SUGGESTS STAGFLATION FEARS - UBS
-CLICK HERE
SCOPE FOR MORE EPS UPGRADES IN EUROPE - BOFA - CLICK HERE
STOXX GOING NOWHERE, "LOW QUALITY BEAT" FOR NOVO - CLICK
HERE
EUROPE EYES MUTED START POST-FED - CLICK HERE
INTERVENE, RINSE, REPEAT - CLICK HERE
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EM chipmakers trade cheaper than Nvidia https://tmsnrt.rs/44tATvh
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