Future Tech

Nvidia frenzy widens gap between US chipmakers and Asian peers

Tan KW
Publish date: Sat, 24 Feb 2024, 12:05 AM
Tan KW
0 424,724
Future Tech

The artificial intelligence mania sparked by Nvidia Corp’s sterling results has given a lift to Asia’s major chipmakers, but it hasn’t closed the valuation gap with their US peers.

A Bloomberg gauge tracking Asia’s top semiconductor firms, including Taiwan Semiconductor Manufacturing Co and Samsung Electronics Co, widened its underperformance against the Philadelphia Semiconductor Index this week. While the Asian index trades at 17 times forward earnings, the US measure is at 27 times, pushing the gap close to a record after Nvidia’s blowout revenue outlook reinforced investor conviction in the boom in generative AI use.

Nvidia’s 8% jump this week dwarfed gains of 2.1% for TSMC and 0.4% for Samsung. SK Hynix Inc, a key memory chip supplier for Nvidia’s AI processors, stood out in Asia with a 10% jump to a two-decade high. In total, major Asian chip stocks added $31 billion in value this week, about 1/10 of the gains in US names. Nvidia rallied as much as 16% Thursday, adding about $277 billion in market value.

Lingering concerns about sluggish smartphone and PC demand from China have weighed on major players like Samsung and their stock valuations. Additionally, worries over possible US sanctions have also hurt valuation for Chinese stocks like Semiconductor Manufacturing International Corp.

Nvidia’s earnings are propelled primarily by AI applications, unlike TSMC, which also relies on a large smartphone business. While TSMC is Nvidia’s go-to chipmaker for fabricating its AI silicon, the “Nvidia earnings rise cannot directly translate into TSMC,” according to Bloomberg Intelligence analyst Charles Shum.

Yet, Templeton Global Equity Group sees investment potential in the Asian semiconductor sector’s relative undervaluation, as the region’s chipmakers could benefit from the AI boom more than what the market expects.

“AI is a secular trend, and Asia plays a pivotal role in its supply chain,” said Ferdinand Cheuk, portfolio manager at Templeton Global. “Asia is the backbone for AI.”

Japan excels in providing the equipment and components required to build AI chips, while South Korea specializes in producing memory that integrates with AI chips, Cheuk said. Taiwan provides both the AI chip foundries and downstream design manufacturers who assemble AI servers, he added.

 


  - Bloomberg

 

Discussions
Be the first to like this. Showing 0 of 0 comments

Post a Comment