NVIDIA concept stocks experience big ups and downs in the second half of 2024. The Taiwan stock market's gold mining opportunities are here.

NVIDIA’s recent market performance has been truly exciting. In mid-June, NVDA’s market capitalization soared to a high of $3.34 trillion, surpassing Apple and Microsoft to become the world’s most valuable company. However, it then started to plunge, with the stock price retracing over 20% in just two weeks, and nearly $800 billion in market value evaporated within half a month. But after entering August, NVIDIA’s stock rebounded again, rising a total of 25% by mid-October, with the share price climbing back to $134.80, almost reaching the June high.

Behind this volatility in NVIDIA’s market, NVIDIA concept stocks have also experienced a rollercoaster ride. TSMC’s September revenue hit a record high of NT$251.8 billion, a 39.6% increase year-over-year; and ASE announced plans to build a new factory in Kaohsiung, actively expanding in advanced packaging. These Taiwanese companies in NVIDIA’s supply chain have become focal points for many investors.

Gold Rush in the Supply Chain: What Are NVIDIA Concept Stocks?

NVIDIA is a fabless semiconductor company, responsible only for chip design and marketing, with manufacturing outsourced. Taiwanese firms, leveraging years of technological expertise, hold key positions in wafer foundry, chip testing, server manufacturing, and other segments. These Taiwanese companies closely tied to NVIDIA’s business are called NVIDIA concept stocks.

Why are investors optimistic about these companies? The core logic is simple: NVIDIA leads globally in AI, deep learning, cloud computing, and autonomous driving, with related technologies increasingly widespread. NVIDIA’s business expansion benefits the entire industry chain, from hardware manufacturers to service providers, all of whom could profit. Moreover, as AI infrastructure accelerates, orders and capacity demands for these related vendors are expected to continue growing.

Overview of Taiwanese NVIDIA Concept Stocks: Who Should You Watch?

Let’s look at some representative NVIDIA concept stocks in Taiwan worth investor attention:

TSMC (2330) is the leader. In September, its revenue grew 39% YoY, with high-performance computing (mainly AI-related) accounting for 52% of revenue, surpassing smartphone business to become the largest segment. Market expectations are that as major players further increase AI infrastructure investments, this segment will continue to grow. Valuation-wise, the 2024 P/E ratio is about 28x, expected to drop to 22x in 2025. For a stable profit-making tech giant with market leadership, the valuation isn’t expensive. Technically, the stock is in a bullish pattern with short-term upward momentum.

Sun Moon Lake Holdings (3711) is the second major beneficiary. The company provides advanced testing and packaging services for NVIDIA GPUs. Although short-term stock price fluctuations are modest, expansion efforts are ongoing. In September, it announced acquisitions of Infineon’s facilities in the Philippines and Korea, further expanding into automotive and industrial sectors. Its gross margin reached 16.1% in the first half of 2024, while NVIDIA’s advanced packaging services have gross margins of 20%-30%, indicating significant growth potential.

Quanta (2382) mainly manufactures AI servers and collaborates extensively with NVIDIA. September revenue reports show AI server business boosting non-PC product performance to over 70%, while PC business remains under pressure. Quanta supplies motherboards, racks, and assembly for NVIDIA’s HGX and PCIe servers. As AI server orders increase, the company’s performance is expected to further improve.

GigaDevice (2376) is also a server hardware supplier with deep cooperation with NVIDIA. Its subsidiary, GigaSteel, is a certified NVIDIA supplier. In 2023, server products accounted for only 21% of revenue, but by Q1 2024, this surged past 50%, and in Q2, over 60%. Orders for NVIDIA H100/H200 are strong, with next-generation products like B200A and GB200 already in development, likely to further boost revenue next year.

Vanguard Electronics (2449) specializes in GPU and FPGA testing, holding over half of the FPGA chip testing capacity. Its capital expenditure in 2024 has been raised from NT$5.314 billion to NT$13.828 billion, reflecting confidence in future growth.

Wistron (3231) is a major supplier of NVIDIA DGX and HGX servers, also producing NVIDIA GPU substrates. NVIDIA’s CEO has explicitly stated that upcoming supercomputers will place orders with Wistron, which could further elevate its performance.

MediaTek (2454) has a relatively new partnership. In May 2023, it announced collaboration with NVIDIA on automotive AI chips, with the first chip targeting smart cabins, expected to launch in 2025 and contribute revenue from 2026. There are also reports that the two are developing dedicated AI chips for PC platforms, with design finalized and mass production expected in late 2025, potentially challenging x86 architectures.

US NVIDIA Concept Stocks: ARM, AMD, and Others Also Have Opportunities

Beyond Taiwan, many NVIDIA concept stocks in the US are worth attention.

ARM Holdings was once targeted for a $40 billion acquisition by NVIDIA, but the deal failed. Still, ARM remains a key holding for NVIDIA, with an estimated holding value of about $147 million. Rumors suggest NVIDIA is preparing to launch chips combining next-generation ARM cores with Blackwell GPU architecture to enter the Windows on ARM market. ARM is also developing standalone GPUs for PCs, which, if realized, would directly compete with NVIDIA. Recently, ARM shifted its sales strategy from charging based on chip value to charging based on the value of devices using its designs, indicating a move toward SaaS-like revenue. Long-term, this could stabilize income growth. However, in the short term, ARM has already gained over 100%, recently returning to its previous high of $152. Whether it can break through remains to be seen.

AMD, Qualcomm, Microsoft, Google, Amazon, and other tech giants are also considered NVIDIA concept stocks because they are major purchasers of AI chips or have AI data center businesses that compete or cooperate with NVIDIA.

Three Key Points for Investing in NVIDIA Concept Stocks

First, many NVIDIA concept stocks have already experienced significant gains. Whether their future earnings can support high valuations requires ongoing observation. Investors should avoid blindly chasing highs and instead focus on whether the company’s actual revenue and profit growth can justify the valuation.

Second, not all companies in the supply chain are interchangeable. As NVIDIA expands, more new players will enter the supply chain, bringing potential competition. Investors need to stay updated on industry changes and adjust strategies accordingly.

Third, from a long-term perspective, AI is just beginning to transform the industry. NVIDIA’s GPU capacity remains in tight supply. AI models like Sora for text-to-video will further boost market demand. The Taiwanese NVIDIA concept stocks all have solid earnings growth foundations and are worth long-term attention.

Currently, the market is focused on upcoming earnings calls, expecting companies to provide outlooks for Q4 and 2025. In the short term, TSMC’s stock price has strong support, but watch for momentum changes if RSI exceeds 70. Sun Moon Lake faces short-term challenges, with all moving averages in a confusing crossover pattern, so investors may consider avoiding at this stage.

Overall, the investment logic of NVIDIA concept stocks is clear, but stock selection requires caution. Not all concept stocks are worth investing in; consider the company’s position in the supply chain, its business relationship with NVIDIA, profitability, and growth potential. Only by doing so can you steadily profit from the AI wave.