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Top 5 Semiconductor Stocks to Watch Amid Generative AI Market Expansion

The dramatic expansion of the generative AI market is strongly stimulating demand for “AI semiconductors.” We focused on promising stocks in the semiconductor-related sector, which are bright spots.
– Eyes on the driving force behind NVIDIA’s unrivaled status, and pursues peripheral stocks with increasing business opportunities due to the expansion of the generative AI market –

The popularity of searching for semiconductor-related stocks continues in waves. The expansion of the generative AI market is creating an explosive need for semiconductors used for AI, and companies and industries related to this are about to experience an unprecedented boom. Even in the Tokyo market, stocks related to AI semiconductors have the potential to significantly change their stock prices in a short period of time. We searched for leading stocks related to the same.

●US Nvidia has a strong presence in the Tokyo market

This week (4th to 8th) was a major SQ week in March, and the Tokyo stock market had a rough time. On the 7th, the day before the SQ, the Nikkei Stock Average suffered a temporary drop of more than 570 yen due to futures-led selling, and even on a closing price basis it fell by nearly 500 yen, falling below the 40,000 yen mark.

However, on the 8th of the weekend, he turned risk-on again and acted as if nothing had happened. Immediately after the approaching SQ, the price sank into negative territory as it tested the lower price, but that was short-lived as there was strong buying demand and the price was aimed at the upper price with an eye on the 40,000 yen mark. Although the rate of increase in the latter market narrowed and it ended up closing at 39,688 yen, failing to recover to the 40,000 yen level, the number of rising stocks reached nearly 70% of the prime market, clearly reflecting the strong desire to purchase individual stocks. It’s been 1 day.

The previous day, on the 7th, semiconductor-related stocks were bought in the US stock market, with US image processing semiconductor (GPU) major NVIDIA being the popular symbol stock for “Generative AI/Advanced Semiconductors”, which has become the cornerstone of theme buying.performance was outstanding.Toyota Motor Corporation’s market capitalization has already exceeded 300 trillion yen in Japanese yen terms. <7203> [東証P]It has become a gigantic giant, more than five times the size of Japan. This NVIDIA effect is having a huge impact on the Tokyo market as well.

For example, on February 22, when the Tokyo market reached an all-time high of 38,915 yen for the first time in about 34 years, Tokyo Electron led the market. <8035> [東証P]and Advantest <6857> [東証P]It was a major semiconductor-related stock, including . And it was undoubtedly Nvidia that strongly stimulated the stock prices of these stocks. The company’s financial results announced in the early morning of the same day, Japan time, were shocking, not only easily jumping over the high hurdles predicted in advance, but filled with excessive expectations. The rate of change in business results shocked market participants and investors, but naturally the company’s stock price soared after hours. The tidal wave of this surprise flooded the Tokyo market, strongly stimulating the stock prices of semiconductor-related stocks and causing the Nikkei Stock Average to reach a new all-time high.

●Special demand for AI servers due to expansion of the generative AI market

The semiconductor sector has changed so much that last year’s market slump now sounds like old news. In particular, an unprecedentedly strong follow wind is blowing in semiconductors for AI, which will benefit from generative AI, which is currently experiencing accelerated growth. GPUs manufactured by Nvidia, which has transformed the company’s business performance, are synonymous with semiconductors for AI, but processors that are suitable for deep learning processing also fall into this category, as well as FPGAs and ASICs. In addition, HBM (high-bandwidth memory) is considered essential in the AI ​​memory installed in GPUs, and this plays the role of temporarily storing a huge amount of processing information when the GPU is performing calculation processing. These product groups will be in the spotlight as key devices in the future due to the evolution of AI, including generative AI, and the expansion of the market size.

It is known that the expansion of the generative AI market is strongly stimulating demand for data center expansion, but specifically, generative AI can be utilized via an “AI server” installed inside the data center. It takes shape. The process of deriving an answer on the AI ​​server follows the steps of generating new data based on patterns acquired through deep learning of the characteristics and format of the data. At this point, GPUs with their strengths in high-speed parallel processing became essential, and this became the background for NVIDIA’s unparalleled performance.

● Hinomaru semiconductor Rapidus also soars

According to the World Semiconductor Market Statistics (WSTS), the semiconductor market in 2024 is expected to reach a record high of $588.3 billion (approximately 87 trillion yen in Japanese yen), a double-digit growth rate of 13% compared to the previous year. And the growth will never stop. “It is estimated that the semiconductor market will reach $1 trillion in 2030, with an average annual growth rate of approximately 10%. However, the growth rate of semiconductors for AI is expected to be much higher, at around 25%. (mid-level securities analyst). As a growth driver for the semiconductor market, AI semiconductors are likely to make their presence felt over the medium term.

In Japan, new semiconductor company Rapidus announced on February 27th that it will collaborate with Canadian semiconductor design company Tentorrent to develop semiconductors for AI. Rapidus aims to mass produce cutting-edge semiconductors, and through this collaboration, it will be able to manufacture Tentorrent. The company plans to build a track record that will lead to future breakthroughs, but as the AI ​​market continues to expand, there is no doubt that Lapidus will play an important role as a symbol of Hinomaru Semiconductor. In the stock market as well, it seems that stocks with advanced technologies related to the field of semiconductors for AI will soon be in the spotlight. In this top feature, we have carefully selected five stocks that occupy a corner of the AI ​​semiconductor industry and whose stock prices seem to have a lot of room to rise.

●5 stocks that are expected to bloom in the area of ​​semiconductors for AI

◎Shikino High Tech<6614> [東証S]

Shikino HT’s main focus is developing semiconductor testers for the automobile industry, but it also handles semiconductor design and has an advantage in power devices. It also has strong development capabilities in areas such as image processing systems and IP cores. The IP core is a type of AI semiconductor and has a proven track record with the “MIPI IP core” for FPGAs, which can be configured after manufacturing and shipping. In terms of performance, semiconductor testers are performing well due to the expansion of automobile production, and although sales will continue to increase in the fiscal year ending March 2024, operating income will decline by 15% year on year to 500 million yen due to the impact of R&D costs. Profit is expected to decrease to 60 million yen. However, the same profit for the fiscal year ending March 2025 is likely to rebound by double digits to around 700 million yen, setting a new record high. It is also noteworthy that ROE is high at around 25%.

The stock price has been on a downward trend since reaching a year-to-date high of 4,500 yen in April last year, and the market price of around 2,500 yen has been forced into a deep push with a discount of around 45%. However, as the price continued to adjust in the mid-2,000 yen range, the market has largely settled down. Sooner or later, the stock is expected to bottom out and become active in the 3,000 yen level.

◎Osaka Organic Chemical Industry<4187> [東証P]

Daio Organic is an independent chemical manufacturer that specializes in special acrylic esters and is characterized by high-mix, low-volume production. We have a strong track record in chemical products, electronic materials, and functional chemicals. In addition to materials for LCDs and organic EL, the company will seize business opportunities in raw materials for semiconductor resists and benefit from the revival in demand for semiconductors backed by the expansion of the generative AI market. In particular, raw materials for EUV (extreme ultraviolet) resists, a cutting-edge field, are rapidly increasing, and there are strong expectations for growth. For the fiscal year ending November 2024, operating profit is expected to increase by 3% year on year to 3.7 billion yen, which is expected to be a modest recovery, but the speed of profit growth is likely to accelerate again from the fiscal year ending November 2025.

The stock price has been on an upward trend since the beginning of this year, hitting its highest since last year at 3,420 yen on the 4th of this month, and has since made a push, but now is a good time to buy. The price is expected to resume its upward pursuit sooner or later, aiming for the 4,000 yen level for the first time since November 2021. In terms of stock demand and supply, the margin buying balance has dried up, so the top price is light, and short selling through the stock lending market is also piling up, so the buybacks are also likely to give lift to stock prices.

◎Digital media professional<3652> [東証G]

DMP is a fabless semiconductor company focused on research and development, but it is well-versed in 3D image processing technology and has earned a high reputation for developing and providing graphics IP cores necessary for detailed drawing. We develop products and services using image recognition technology that utilizes AI and deep learning as key technology. We are also delving deeper into the field of edge AI, with high-precision image recognition edge AI software “ZIA SAFE” receiving strong inquiries for use in safe driving support systems.Additionally, in October last year, THine Electronics announced its edge AI camera solution. <6769> [東証S]announced a collaboration with Sales for the fiscal year ending March 31, 2024 are expected to increase significantly by 27% year on year to 2.95 billion yen, marking a consecutive record high. In addition, operating income is expected to rapidly change to 240 million yen, an 8.9 times increase from the previous year, which is the highest level in 12 years since the fiscal year ended March 2012, which was a standalone fiscal year.

The stock price adjusted after being bought to 3,520 yen on February 16th, but has recently started to recover. We can expect the stock to move toward the 4,000 yen level, and aim for the highest price since last year of 4,385 yen, which was set on May 30th last year.

◎Trichemical Research Institute<4369> [東証P]

Trichemical produces high-mix, low-volume high-purity chemicals necessary for manufacturing cutting-edge semiconductors. In particular, the company boasts high technological capabilities when it comes to insulating film materials, and holds one of the world’s largest product shares. The “High-K” produced by the company has a higher dielectric constant than silicon oxide, helps improve the performance of semiconductors, and appears to be gaining demand for applications such as HBM. Although it is a global niche leader with overseas sales accounting for 70% of its sales, it is also expected to play an active role in companies such as Rapidas, which plans to mass produce cutting-edge semiconductors in the near future.Also, Tokyo Electron <8035> [東証P]The company is collaborating with the company on etching materials for 3D NAND memory, and is expected to contribute to business results from next fiscal year onwards.

In the fiscal year ending January 2024, the impact of last year’s semiconductor recession will be reflected, and sales will be sluggish mainly in South Korea, and operating income is expected to be 1.7 billion yen, down 50% from the previous fiscal year. However, this has already been factored into the stock price. In the fiscal year ending January 2025, there is a high possibility that the company will regain its growth potential and head towards a V-shaped recovery. Expectations are high for the stock price to move on a large scale, with the stock price reaching its highest since listing in January 2021 of 5,042.50 yen (revised stock price).

◎ADEKA<4401> [東証P]

ADEKA is a chemical manufacturer that handles resin additives for automobiles, electronic materials for semiconductors, processed oils and fats for food, etc. In semiconductors, it has strengths in cutting-edge products and has a strong track record in high dielectric materials. With an industry share of over 50% for high dielectric materials for semiconductor memory, its capabilities are outstanding. In addition, more than half of the company’s total sales come from overseas, with business operations in 16 countries and regions around the world. In late February, the company announced that it would construct a new manufacturing building at its subsidiary’s factory in Jeonju, South Korea, in order to secure production space to build a mass production system for new materials for next-generation semiconductors. We are steadily making the first move.

The top line has continued to expand for 11 consecutive years since the fiscal year ended March 2013, and sales are expected to increase in the fiscal year ending March 2024, with operating income expected to increase 7% year on year to 34.5 billion yen. It is highly likely that the trend of increasing sales and profits will continue in the fiscal year ending March 2025. Stock prices have been on an upward trend since mid-February, with strong price movements near the highest prices. In terms of stock price indicators such as PER, the stock does not appear overvalued, and it is expected that the stock will move through the blue sky with no rebound selling pressure.

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2024-03-09 10:30:00
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