Major US technology companies such as Nvidia, Microsoft, and Alphabet have benefited from the artificial intelligence buzz in the market over the past year. But many small and medium-sized enterprises along the global AI supply chain also stand to benefit. BofA said in a March 15 memo that the AI market will be “booming” with multiple AI solutions starting in late 2023. Most chips rely on TSMC’s production, and chip and integrated circuit designs are sourced around the world or from Taiwan, and some chips rely on TSMC’s production. BofA said the parts came from Greater China. “The lack of AI/computing suppliers provides higher added value and bargaining power, especially for high-priced AI products,” BofA analysts said. The bank listed different parts of the supply chain that could benefit from AI and the top stocks in each category. Manufacturer of original design for servers Global companies are collaborating with Taiwanese manufacturers on highly customized projects such as AI graphics processing units, the bank noted. These are BofA’s top picks among such manufacturers and suppliers: Quanta: According to the investment bank, the company is a top original design manufacturer and has a diverse customer base. BofA said the company has been working with Google for more than a decade thanks to its ability to create highly customized server designs. Wistron: A leading supplier of baseboards for graphics processing units, according to the bank. He expects the AI server GPU baseboard business to account for 3% to 6% of Wistron’s total sales in 2024 and 2025 due to growth in AI server applications and GPU supply. This is an increase from his 1% in 2023. Foxconn Industrial Internet: BofA is a key partner in this through Microsoft and his Nvidia subsidiary Ingrasys. He also mentioned that Foxconn Industrial Internet has supported Microsoft’s OpenAI for many years. Hardware technology Hardware technology, such as printed circuit boards, is an upstream part of the AI server supply chain. These materials and components “will always be needed,” BofA said. These are BofA’s top candidates in this field. BofA says Unimicron and NYPCB are leading the way when it comes to technology and product development related to AI and high-performance computing. However, the bank said Unimicron is growing AI server revenue faster, as evidenced by its “track record” in manufacturing printed circuit boards for NVIDIA. According to Semiconductors BofA, chip designs are becoming more expensive because they are more complex and the cost of developing the physical components increases. But manufacturing chips for AI applications requires more advanced technology, so there is “increasing reliance” on companies with “proven track records” in designing customized chips, the bank said. . “In our view, finding reliable IP and design service providers has become more important in the AI era, as overall R&D investments have become higher and customers (chip designers) ) avoids the risk of failure.” “Overall, IP and design services represent a small portion of the total global semiconductor market, but they are becoming increasingly important as chip performance is highly dependent on the quality of IP and chip design.” Against this backdrop, the bank named Taiwanese stocks Alchip and Ememory as major beneficiaries. BofA also named MediaTek, one of Asia’s leading fabless companies, which is indirectly benefiting from the AI server trend. The bank said it sees “significant upside” for MediaTek as it expands its customized chips into hyperscalers. Additionally, BofA’s partnership with Nvidia in automotive AI should expand AI opportunities, he noted. —CNBC’s Michael Bloom contributed to this report.
