Nvidia’s partners and more: BofA picks key global stocks along the AI supply chain
Big U.S. tech companies such as Nvidia , Microsoft and Alphabet have benefited from the artificial intelligence buzz in markets for the past year. But many smaller firms along the global AI supply chain also stand to benefit. BofA said in a March 15 note that there’s been a “booming” AI market with multiple AI solutions since the second half of 2023. Most chips are dependent on TSMC’s production, with chip and integrated circuit designs being sourced globally or from Taiwan, and some components from Greater China, said BofA. “The scarcity of AI/computing suppliers helps higher value-added and bargaining power, esp. for costly AI products,” BofA analysts wrote. The bank named various parts of the supply chain that stand to benefit from AI, and its top stocks in each category. Server original design manufacturers Global firms have worked with Taiwanese manufacturers for highly customized projects, such as AI graphics processing units, the bank noted. These are BofA’s top picks among such manufacturers or suppliers: Quanta : The investment bank says it’s the top original design manufacturer and has a diversified client base. It has worked with Google for over a decade, thanks to its ability to produce highly customized server design, BofA noted. Wistron : A major graphics processing unit baseboard supplier, according to the bank. With rising AI server applications and GPU supply, it expects the AI server GPU baseboard business to account for 3% to 6% of Wistron’s total sales in 2024 and 2025. That’s up from 1% in 2023. Foxconn Industrial Internet: BofA noted it’s a key partner to Microsoft and Nvidia through its subsidiary Ingrasys. It also noted that Foxconn Industrial Internet has been supporting Microsoft’s OpenAI for years. Hardware tech Hardware tech such as printed circuit boards are the upstream parts of the AI server supply chain. These materials or components are “always needed,” BofA said. These are BofA’s top picks in this space: Unimicron and NYPCB are ahead when it comes to tech and product development related to AI and high performance computing, BofA said. Unimicron, however, has been faster in ramping up AI-server related revenue, as is evident from its “proven track record” in producing printed circuit boards for Nvidia, according to the bank. Semiconductors BofA says chip design is getting more expensive, as it becomes more complex and the costs of developing the physical components grow. But because a more advanced technology is needed to build chips for AI applications, there’s a “growing reliance” on companies with a “solid track record” for designing customized chips, the bank said. “In our view, finding trustable IP and design service providers has become more crucial in the AI era, as the overall R & D investment becomes costlier and customers (chip-designer) shy away from the risk of failure,” BofA analysts wrote. “Overall, IP and design service represents a small part of the whole semiconductor market globally, but turns increasingly important since the chip performance is largely predicated on the quality of IP and chip-design.” Against this backdrop, the bank named Taiwanese stocks Alchip and eMemory as key beneficiaries. BofA also named MediaTek , a leading fabless company in Asia that is an indirect beneficiary of AI server trends. The bank says it sees “strong upside” for MediaTek as it expands its customized chips to hyperscalers. In addition, its partnership with Nvidia in automotive AI should widen its AI opportunities, BofA noted. — CNBC’s Michael Bloom contributed to this report.
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