The hunt is on for companies that could benefit from the tailwinds of an unprecedented wave of initial public offerings (IPOs) in the US, and investors are increasingly honing in on the Asian supply chain.
Their thesis is that the billions of dollars that Space Exploration Technologies Corp (SpaceX), Anthropic PBC and OpenAI are set to raise would prompt a fresh round of technology spending — with a good chunk of that finding its way to the makers of server parts, specialized materials, cooling components and power equipment. For stock markets in Asia, that could be the catalyst for the next leg of a historic rally.
Hardware firms in the region are among the biggest winners of the data-center buildout, which has propelled chipmakers Taiwan Semiconductor Manufacturing Co (台積電), Samsung Electronics Co and SK Hynix Inc into the trillion-dollar club.
Photo: Reuters
However, after their breakneck gains, some investors have become uneasy about those lofty valuations and are now betting that the next phase would create a new class of champions.
“AI IPOs could further fuel the capex boom at a time when Asian chip stocks look stretched,” Eastspring Investments Hong Kong Ltd equity portfolio specialist Ken Wong (黃嘉權) said. “We’re currently underweighting semiconductors in our Asia technology strategy and focusing more on the electronic component makers.”
The battle for artificial intelligence (AI) leadership has driven massive expenditures on computing networks by the likes of Meta Platforms Inc and Amazon.com Inc. The listings of SpaceX, OpenAI and Anthropic might mean a total of US$70 billion in AI spending on top of the more than US$750 billion already committed by those biggest hyperscalers, IG International analyst Fabien Yip (葉蔚文) said.
“The flow-through to Asia is prominently visible” in the latest chipmaker earnings reports, she said. “As the AI rally matures, the broadening beyond pure-play names is underway.”
Some of the region’s hottest stock trades have been makers of electronic components used in servers as well as providers of materials and techniques used in making semiconductors. South Korea’s Samsung Electro-Mechanics Co and Japan’s Ibiden Co are among the top performers on MSCI Inc’s broadest Asia equity index this year. Among more far-flung plays, Yip highlights Japanese toilet maker Toto Ltd, which supplies ceramic materials for chipmaking equipment.
Supply crunches at Asian chipmakers are now starting to appear further down the supply chain, and the trend might deepen with the continued inflow of capex funding. Given concentration risks and limits on how much funds can invest in single stocks, money managers are looking at where earnings are only beginning to reflect the scale of AI infrastructure spending.
Jupiter Asset Management Ltd portfolio manager Sam Konrad sees opportunities in Taiwan’s Hon Hai Precision Industry Co (鴻海) and Quanta Computer Inc (廣達), which assemble servers, as well as chip designer MediaTek Inc (聯發科).
“The AI capex cycle is going to last multiple years,” he said. “Investors are likely to look for companies that are direct beneficiaries, but that are still trading at low valuation multiples.”
BNP Paribas Asset Management Asia Ltd’s Song Zhe (宋哲) said the next leg of the rally “should be stock-specific, not a blanket semiconductor trade.” His team is focused on advanced packaging, substrates, testing, optical connectivity, power, cooling and server-related companies across Taiwan and China “where earnings upgrades can still justify valuations.”
Swiss-Asia Financial Services Pte Ltd portfolio manager Brian Ooi (黃順豫) sees the SpaceX, OpenAI and Anthropic capital raisings as a positive signal to remain invested in AI stocks. He also likes power, with particular interest in transformers, fuel cells, cables, gas turbines and other equipment.
The three big 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 will benefit.”
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