Taiwan’s Wide AI “Sweet Spot” Lifts Its Main Stock Index To Record High

Taiwan’s Wide AI “Sweet Spot” Lifts Its Main Stock Index To Record High
Taiwan’s Wide AI “Sweet Spot” Lifts Its Main Stock Index To Record High
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A screen displays stock figures at the Taiwan Stock Exchange Corp. headquarters in Taipei, Taiwan, … [+] on Monday, July 10, 2023. The exchange’s benchmark index closed at an all-time high today. Photographer: I-Hwa Cheng/Bloomberg

© 2023 Bloomberg Finance LP

Taiwan’s benchmark stock index gained 0.7% today to close at an all-time of 20,857.71, adding to a surge of nearly 35% in the past 12 months largely fueled by suppliers of AI-related semiconductors and network servers. Looking ahead, sales of upgraded devices such as smartphones are likely to increase, further benefiting its well-placed manufacturers and designers, according to one long-time Taiwan technology analyst.

Taiwan, a leader in chips and computing hardware for decades, is in a “sweet spot” of changes being brought about by AI technology, said Dan Nystedt, vice president at family office investment firm Tri-Orient Investments in Taipei, in a recent interview . Beyond growing sales for semiconductors, “there will be an upgrade cycle for phones and PCs,” Nystedt said.

Among a slew of stock gainers in the past year, US-traded shares in chipmaker Taiwan Semiconductor Manufacturing, or TSMC – whose clients include AI chip heavyweight Nvidia and Apple — on Friday rose to an all-time high in Nasdaq trading after the company announced a 60% increase in revenue in April from a year earlier.

Taiwan’s clout in technology manufacturing dates back to the 1980s when it first entered the PC business; the winners over the years have taken on global heft that has allowed them to build ties with many of the world’s largest consumers of technology hardware – such as Amazon and Microsoft, says Colley Huang, long-time Taiwan IT industry expert and publisher of Taipei- headquartered tech daily Digitimes,

On the semiconductor manufacturing side, TSMC is the most visible winner. Yet chip designers such as MediaTek and AIChip have grown rapidly and are poised for more expansion, Nystedt said. Companies that make servers used in data centers to process the growing load of information associated with AI applications are also likely to benefit. “The clear growth for the next upteenth years will be servers” purchased by datacenters, said Nystedt. Already profiting from that growth, Taiwan-traded shares in PC maker Acer’s spinoff Wistron and Wistron spinoff Wiwynn have both more than doubled in the past year.

Shares in Taiwan smartphone chip designer MediaTek, chaired by billionaire Tsai Ming-kai, have risen … [+] nearly two-thirds in the past year. (Photo by Walid Berrazeg/SOPA Images/LightRocket via Getty Images)

SOPA Images/LightRocket via Getty Images

Computer devices will have to pick up some of the AI ​​computing workload from data centers, however. “Your PC will help run the AI ​​locally on your computer,” Nystedt said. PC hardware likely to gain include big Taiwan contract manufacturers Foxconn, founded by billionaire Terry Gou, Quanta, led by billionaire Barry Lam, because they benefit from increased PC shipments. That expected tide should also lift smaller component manufacturers, such as Fositek, Jarllytec and Shin Zu Shing. “One would think all high-end smartphones will be AI smartphones, especially the foldables,” though time has yet to prove that out, Nystedt said.

Globally, prospects for the rollout of AI-related high-powered chips and devices are good. “China will be a growth driver and see some pretty amazing growth because you have companies like Baidu and Xiaomi. People there are very early adopters. They really love to buy new stuff, and I think you’ll quickly see a lot of that stuff in phones over there,” he said. “It’s huge opportunity for China because they have so many big smartphone makers.”

Nystedt also sees growing synergy between Taiwan and Japan, with more capital and talent from the former teaming up with the latter. “One of the most interesting things I’ve heard recently is that the price of an apartment in Tokyo was less expensive than the price of an apartment in Taipei,” Nystedt said. “So you have an advanced place for high-tech with schools with great engineering and where literally, from Taiwan, you can set up a chip design house and do very well.”

“Japan is very well positioned and the Taiwanese are very well positioned” for growth and partnering, he said. TSMC, with partners, opened its first plant in Japan’s Kumamoto Prefecture and announced plans for a second one in February this year.

Taiwan Semiconductor Manufacturing Co.’s (TSMC) new factory, left, in Kikuyo, Kumamoto Prefecture, … [+] Japan, on Friday, Feb. 23, 2024. Photographer: Toru Hanai/Bloomberg

© 2024 Bloomberg Finance LP

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