NVIDIA’s recent earnings report has surpassed expectations, highlighting the company’s pivotal role in the booming AI sector. Its stock has crossed $1,000 for the first time and has seen a 170% increase over the past year, reflecting strong market interest and the untapped potential of AI technology. This success has significant implications for the Asian AI supply chain, presenting promising investment opportunities. The growing demand for NVIDIA’s GPUs is set to benefit companies like SK Hynix, TSMC, Advantest Corp., Alchip Technologies, Andes Technology, AP Memory Technology, and Micronics, all of which are key players in the AI supply chain.

NVIDIA’s Impressive Performance

Surpassing Expectations

NVIDIA’s first-quarter results have left investors and analysts in awe. The company’s exceptional performance is largely attributed to the rising demand for AI technologies, particularly its H100 GPUs and Hopper chip series. The robust earnings have not only bolstered investor confidence in NVIDIA but also in the broader AI supply chain.

Stock Surge

The reaction to NVIDIA’s earnings report was immediate and profound. The company’s shares soared past $1,000, a historic milestone, reflecting a year-over-year increase of approximately 170%. This remarkable growth indicates that the market for AI technology is far from reaching its peak, and there is still substantial buying power available.

Implications for the Asian AI Supply Chain

Growing Demand for GPUs

The increasing demand for NVIDIA’s advanced GPUs is set to benefit the Asian AI supply chain significantly. As the need for high-performance computing solutions grows, companies involved in the production and supply of these technologies are poised to see improved profit marginsIn the dynamic world of business, profitability is a fundamental metric that encapsulates a company's ability to generate earnings from its operations. Profit margins, expressed as... More in the second half of the year.

Investment Opportunities

Investors seeking to capitalize on the AI boom should consider potential pullbacks as opportunities to enter or expand their positions in related stocks. The following companies are positioned to benefit from the growing demand for AI technologies:

1. SK Hynix (South Korea)
2. Taiwan Semiconductor Manufacturing Company (TSMC) (Taiwan)
3. Advantest Corp. (Japan)
4. Alchip Technologies (Taiwan)
5. Andes Technology (Taiwan)
6. AP Memory Technology (Taiwan)
7. Micronics (Japan)

Key Players in the Asian AI Supply Chain

SK Hynix

Overview

SK Hynix, a South Korean tech giant, has been a prominent player in the semiconductor industry. The company is well-positioned to benefit from the AI boom due to its expertise in high bandwidth memory and custom chip design.

Analyst Ratings

According to FactSet data, SK Hynix is highly regarded by analysts, with 35 out of 39 analysts giving the stock a buy or overweight rating. This positive sentiment is reflected in the stock’s inclusion in major ETFs such as the iShares MSCI South Korea ETF (8.4% weight) and Franklin FTSE South Korea ETF (8.3% weight).

Taiwan Semiconductor Manufacturing Company (TSMC)

Overview

TSMC, a Taiwanese chipmaker, is another significant player in the AI supply chain. The company is renowned for its cutting-edge semiconductor manufacturing capabilities and is expected to see increased demand for its services as AI technology continues to advance.

Analyst Ratings

TSMC enjoys a favorable outlook from analysts, with 36 out of 38 analysts giving the stock a buy or overweight rating. The company’s shares are prominently featured in ETFs such as the iShares MSCI Taiwan ETF (25.1% weight) and Franklin FTSE Taiwan ETF (22.2% weight).

TSMC (TSM) Technical Analysis

Price Trend Analysis:

• The stock is in an upward trend, indicated by the series of higher highs and higher lows from late December 2023 to May 2024.
• The price is above the 50-day moving average (144.32) and the 200-day moving average (114.55), suggesting a bullish trend.

Volume Analysis:

• The volume shows relatively stable activity with occasional spikes, indicating periods of higher trading interest.

Relative Strength IndexIn the world of technical analysis, the Relative Strength Index (RSI) stands as a cornerstone tool for traders seeking insights into market momentum. Developed by J. Welles Wilder ... More (RSI):

• The RSI is currently at 69.29, approaching the overbought threshold of 70. This suggests that the stock might be overbought in the short term, potentially leading to a price pullback.

On-Balance Volume (OBV):

• The OBV is rising, which supports the bullish price trend. A rising OBV indicates that volume is stronger on up days than on down days.

Stochastic RSIIn the realm of technical analysis, the Stochastic RSI (StochRSI) emerges as a powerful tool for traders seeking to navigate market dynamics with precision. Developed by Tushar S. ... More:

• The Stochastic RSI is at 0.945, near the upper limit of 1, indicating overbought conditions. This aligns with the RSI’s suggestion of a potential pullback.

Average Directional IndexThe Average Directional Index (ADX) stands as a cornerstone indicator in the toolkit of technical traders, offering insights into the strength of market trends. Developed by Welles... More (ADX):

• The ADX is at 32.05, indicating a strong trend. Values above 20 typically suggest a trending market, with values above 30 indicating a strong trend.

Chaikin OscillatorNamed after its creator Marc Chaikin, the Chaikin Oscillator stands as a formidable tool in the arsenal of technical analysts. This oscillator is designed to measure the accumulati... More:

• The Chaikin Oscillator is at 4.33M, suggesting bullish momentum as it is in positive territory.

Support and Resistance Levels:

• Support is observed around the 50-day moving average at 144.32.
• Resistance is noted at recent highs around 160-161.

Time-frame Signals:

• 3 Months: Hold. Despite being in a bullish trend, the RSI and Stochastic RSI indicate overbought conditions, suggesting potential for a short-term pullback.
• 6 Months: Buy. The stock is in a strong upward trend with rising OBV and ADX, indicating continued strength over this period.
• 12 Months: Buy. The long-term trend remains positive, supported by strong fundamentals and positive technical indicators.

Overall, the stock shows strong bullish momentum, but caution is advised in the short term due to overbought indicators. Holding for the next three months with a buy outlook for six to twelve months is recommended.

Advantest Corp.

Overview

Advantest Corp., a Japanese manufacturer, is a leading provider of semiconductor testing equipment. As the demand for AI-related technologies grows, the company’s services are becoming increasingly essential.

ETF Inclusion

Advantest Corp. is included in several major ETFs, including the Goldman Sachs ActiveBeta Japan Equity ETF (1.0% weight) and JPMorgan BetaBuilders Japan ETF (0.8% weight), reflecting its importance in the AI supply chain.

Goldman Sachs ActiveBeta Japan Equity ETF (GSJY) Technical Analysis

Price Movement and Moving Averages:
The price is currently at $37.88. The chart shows two moving averages:

• 50-day moving average (blue line) at approximately $38.03.
• 200-day moving average (red line) at approximately $35.77.
  The price is slightly below the 50-day moving average and above the 200-day moving average, indicating a mixed signal. The price being below the 50-day MA might suggest short-term bearishness, while staying above the 200-day MA suggests long-term bullishness.

Volume:
There was a notable spike in volume around mid-April, indicating increased trading activity, possibly due to significant news or events. Since then, the volume has normalized to lower levels.

Relative Strength Index (RSI):
The RSI (14, MA, 5) is at 52.80. An RSI around 50 indicates neutral conditions, suggesting that the ETF is neither overbought nor oversold at the moment.

On Balance VolumeThe On Balance Volume indicator (OBV) is a technical analysis tool used to measure the flow of money into and out of a security over a specified period of time. It is a cumulative ... More (OBV):
The OBV is at 273,490. The OBV appears to be flat, indicating that the buying and selling pressure are in balance, reflecting a consolidation phase.

Stochastic RSI:
The Stochastic RSI (14, 20, MA) is at 0.710. A value above 0.8 typically indicates an overbought condition, while below 0.2 indicates an oversold condition. With the current value near the mid-point, it suggests a neutral stance with no strong buy or sell signal.

Average Directional Index (ADX):
The ADX (14, 14) is at 10.59. An ADX below 20 indicates a weak trend. Hence, the ETF is not currently exhibiting a strong trend, which aligns with the consolidation suggested by other indicators.

Chaikin Oscillator:
The Chaikin Oscillator is at -722. A negative value indicates selling pressure. This suggests that there might be a bearish undertone despite the neutral signals from other indicators.

Time-frame Signals:

• 3-month horizon: Hold. The mixed signals and neutral indicators suggest it is best to wait for a clearer trend to develop before making a move.
• 6-month horizon: Hold. The price needs to break above the 50-day moving average convincingly for a buy signal or below the 200-day moving average for a sell signal.
• 12-month horizon: Buy. Given the price is above the 200-day moving average, the long-term outlook remains bullish. However, monitor the price action closely for any changes in the trend.

In summary, the current technical indicators suggest a period of consolidation with no strong directional bias. The ETF is showing neutral conditions across most metrics, making it advisable to hold in the short to medium term and consider buying for the long term based on the 200-day moving average trend.

Other Noteworthy Companies

Alchip Technologies, Andes Technology, and AP Memory Technology (Taiwan)

These Taiwanese semiconductor companies are poised to benefit from the AI boom due to their specialized expertise and innovative technologies. Each company offers unique products and services that are crucial to the AI supply chain.

Micronics (Japan)

Micronics, a Japanese filtration services provider, is another company with significant potential in the AI sector. The company’s advanced filtration technologies are essential for maintaining the performance and reliability of high-end semiconductor manufacturing processes.

Insights

1. NVIDIA’s stock surge underscores the ongoing AI market potential.
2. Asian companies in the AI supply chain are poised for growth.
3. Strategic investments in these companies can yield substantial returns.

The Essence (80/20)The Origins and Evolution of the 80/20 Principle The Discovery by Vilfredo Pareto In 1897, Italian economist Vilfredo Pareto uncovered a striking pattern in his study of wealth and... More

1. NVIDIA’s Performance: NVIDIA’s impressive financial results driven by AI technology demand.
   • Surpassing market expectations with robust earnings.
   • Stock value increased significantly, highlighting market confidence.
2. Asian AI Supply Chain Implications: The rise in demand for high-performance GPUs benefits related Asian tech companies.
   • Increased demand for AI technologies boosts supply chain companies.
   • Key companies identified for investment opportunities in the AI sector.

Detailed Descriptions:

• NVIDIA’s H100 GPUs and Hopper chips are in high demand, driving financial success.
• Companies like SK Hynix and TSMC are essential due to their expertise in memory and semiconductor manufacturing.
• Advantest Corp. and other tech companies provide critical testing and manufacturing technologies, integral to AI advancements.

GuerillaStockTrading Action Plan

1. Monitor Market Trends: Keep track of AI technology advancements and NVIDIA’s performance for investment timing.
2. Evaluate Key Players: Assess the financial health and market position of companies like SK Hynix, TSMC, and Advantest Corp.
3. Invest Strategically: Utilize potential market pullbacks to invest in identified companies within the AI supply chain.
4. Diversify Portfolio: Include a mix of established and emerging companies in the AI sector for balanced growth.

Blind Spot

Potential regulatory changes or trade tensions between the US and Asia could impact the AI supply chain and related investments. Investors should stay informed about geopolitical developments and adapt their strategies accordingly.

Looking Ahead

NVIDIA’s impressive earnings and stock performance have reaffirmed the vast potential of AI technologies. As demand for advanced computing solutions continues to rise, the Asian AI supply chain stands to benefit significantly. Investors should consider taking advantage of potential market pullbacks to invest in promising stocks within this sector. Companies such as SK Hynix, TSMC, Advantest Corp., Alchip Technologies, Andes Technology, AP Memory Technology, and Micronics are well-positioned to thrive in the AI-driven future.

FAQ – NVIDIA’s AI Boom and the Promising Future for Asian AI Supply Chain Stocks

Book Recommendations

1. “AI Superpowers: China, Silicon Valley, and the New World Order” by Kai-Fu Lee
   • Description: This book explores the competitive dynamics between China and the United States in the AI race. Lee discusses the strengths and strategies of each nation and the implications for global AI development.
   • Tie-In: Given the focus on NVIDIA’s success and the promising future of the Asian AI supply chain, Lee’s insights into China’s AI capabilities provide valuable context for understanding how Asian companies can leverage AI advancements to compete globally.
2. “The Master Algorithm: How the Quest for the Ultimate Learning Machine Will Remake Our World” by Pedro Domingos
   • Description: Domingos delves into the five major schools of thought in machine learning, explaining how they contribute to the development of the “master algorithm,” which has the potential to solve complex problems across various domains.
   • Tie-In: This book offers a deeper understanding of the technologies underpinning NVIDIA’s advancements and the broader AI sector. It complements the article’s discussion of AI’s transformative impact on the tech industry and the potential for growth in related companies.
3. “Prediction Machines: The Simple Economics of Artificial Intelligence” by Ajay Agrawal, Joshua Gans, and Avi Goldfarb
   • Description: This book provides an economic perspective on AI, explaining how AI reduces the cost of prediction and the implications for business strategy and market dynamics.
   • Tie-In: The economic framework presented in this book helps investors and business leaders make informed decisions about capitalizing on AI technologies. It aligns with the article’s emphasis on identifying investment opportunities in the AI supply chain, particularly in the context of NVIDIA’s market influence and the potential for profit in Asian tech companies.