New Asian AI winners bets after SpaceX, OpenAI windfall
The search is underway for firms poised to capitalise on the favourable conditions created by an extraordinary surge in stock offerings in the United States, with investors progressively focusing their attention on the Asian supply chain. Their thesis posits that the billions of dollars anticipated to be raised by SpaceX, Anthropic PBC, and OpenAI will initiate a new wave of technology expenditure, with a significant portion likely directed towards manufacturers of server components, specialised materials, cooling systems, and power equipment. For stock markets in Asia, that could serve as the catalyst for the next phase of a historic rally. Hardware firms in the region have emerged as significant beneficiaries of the data-center expansion, which has elevated chipmakers Taiwan Semiconductor Manufacturing Co., Samsung Electronics Co., and SK Hynix Inc. into the trillion-dollar club. However, following their rapid increases, certain investors have grown apprehensive regarding those elevated valuations and are currently wagering that the forthcoming phase will yield a new cohort of leaders. “AI IPOs could further fuel the capex boom at a time when Asian chip stocks look stretched,” stated Ken Wong. “We are presently allocating less emphasis on semiconductors within our Asia technology strategy, directing greater attention towards electronic component manufacturers.” The competition for dominance in artificial intelligence has led to significant investments in computing infrastructure by major players such as Meta Platforms and Amazon. The pending equity offerings may alleviate some market apprehensions regarding funding sustainability amid increasing debt levels.
The listings of SpaceX, OpenAI, and Anthropic could signify an additional $70 billion in AI expenditures, supplementing the over $750 billion already pledged by the leading hyperscalers, as noted by Fabien Yip, a market analyst. “The flow-through to Asia is prominently visible” in the latest chipmaker earnings reports, she said. “As the AI rally matures, the expansion beyond pure-play names is in progress.” Some of the region’s most active stock trades have involved manufacturers of electronic components utilised in servers, along with suppliers of materials and methodologies employed in semiconductor production. South Korea’s Samsung Electro-Mechanics Co. and Japan’s Ibiden Co. are among the leading performers on MSCI Inc.’s broadest Asia equity index this year. Among more distant investments, IG’s Yip emphasises Japanese toilet manufacturer Toto Ltd., known for providing ceramic materials utilised in chipmaking equipment. Asian chipmakers have reported substantial profits from AI, driven by robust pricing power as the emerging demand leads to significant semiconductor shortages. Supply crunches are increasingly manifesting further along the supply chain, and this trend is likely to intensify with the ongoing influx of capital expenditure funding. Increased investor awareness of emerging bottlenecks, coupled with technical factors, has led to an expansion of the AI trade beyond the largest chip manufacturers.
In light of concentration risks and restrictions on the allocation of funds to individual stocks, investment managers are increasingly focusing on sectors where earnings have yet to fully capture the impact of substantial AI infrastructure expenditures. Sam Konrad, identifies potential in Taiwan’s Hon Hai Precision Industry Co. and Quanta Computer Inc., both of which are involved in server assembly, alongside chip designer MediaTek Inc. “The AI capex cycle is going to last multiple years,” he stated. “Investors are likely to seek out companies that stand to gain directly, yet continue to trade at low valuation multiples.” Song Zhe remarked that the forthcoming phase of the rally “should be stock-specific, not a blanket semiconductor trade.” His team is concentrating on advanced packaging, substrates, testing, optical connectivity, power, cooling, and server-related companies throughout Taiwan and China, “where earnings upgrades can still justify valuations.” Investments are being directed towards the applications of AI that extend beyond chatbots, encompassing sectors such as robotics and autonomous vehicles. This burgeoning “physical AI” field has received a significant impetus from Nvidia Corp.’s initiatives to cultivate associated enterprises, consequently enhancing the stock performance of partners such as LG Electronics Inc. The supply of power is regarded as another critical domain. Nuclear and alternative energy have garnered significant attention due to their potential in the context of the proliferation of data centers, particularly as the conflict in Iran escalates and contributes to rising oil prices.
Solar firm HD Hyundai Energy Solutions Co. and nuclear player Daewoo Engineering & Construction Co. rank among the leading stocks in South Korea’s exceptional market performance this year. The Adani Group’s expansion into green-powered data centers is enhancing the performance of its energy units, positioning India as one of the limited players in the AI sector. Jian Shi Cortesi identifies power as “the most under-owned bottleneck,” while also warning that the upcoming phase of the AI frenzy could present greater risks than its predecessor. If AI demand fails to justify the scale of spending, companies may reduce capital expenditures, resulting in an oversupply of infrastructure and significant declines in valuations. Brian Ooi, a portfolio manager at Swiss-Asia Financial Services Pte., views the capital raisings by SpaceX, OpenAI, and Anthropic as a favourable indication to maintain investments in AI stocks. He also has a keen interest in power, specifically in transformers, fuel cells, cables, gas turbines, and other related equipment. The three major AI-related IPOs “will provide them more liquidity to further invest in capital expenditure, and they have significant spending plans in place,” he said. Asian suppliers stand to gain.
