Copyright © BusinessAMBE 2023

The elections in Taiwan next weekend are eagerly awaited. The island's geopolitical importance has much to do with its growing role in the field of AI (artificial intelligence).

In the news: Bank of America (BofA) analysts are advising clients to invest in shares of three tech companies in Taiwan that are co-developing AI.

  • The development of new AI requires a lot of server power. The BofA has noticed that Taiwanese companies in particular are developing new hardware for these servers.
  • The BofA expects U.S. tech giants to invest even more in AI this year. Analysts think total investments this year will top $164 billion. By comparison, between 2021 and 2022, giants such as Microsoft, Google and Amazon pumped between $127 billion and $146 billion into AI.
  • "Taiwanese semiconductor and hardware suppliers are essential for developing and testing new AI solutions with higher added value and bargaining power," the analysts wrote.

Investing in these Taiwanese companies

Zoomed in: The U.S. major bank specifically singles out three Taiwanese tech companies to buy shares from:

  • Lite-on Tech: Company that produces semiconductors, LEDs and optical disk drives. The BofA praised the company for, among other things, "better-yielding optoelectronics and cloud/AIoT sales and continued margin expansion." Lite-on Tech shares rose 86 percent in the past year.
  • Quanta Computer: manufacturer of notebook computers and electronic hardware. A "major beneficiary of growing AI applications," according to the BofA. The company has a "continuous supply" in the server and EV sector. Over the past year, Quanta Computer's shares rose more than 200 percent, and the BofA forecasts they will rise another 40 percent in the next 12 months.
  • Wistron: an electronics manufacturer. BofA recommends the company due to its rising sales and compound annual growth rate in earnings per share between 2023 and 2025. Accordingly, Wistron saw the value of its shares rise more than 220 percent. The BofA predicts the value will continue to rise this year as well, with a potential return of nearly 40 percent.

"AI is different from Internet bubble"

Zoomed out: According to the BofA, there is no question of the bubble bursting.

  • Some analysts fear that the growing value of AI stocks is a bubble that could burst. That value would be overestimated, it sounds. This idea is similar to the bursting of the Internet bubble in 2000 or investments in virtual reality (VR), a technology that is becoming less established than predicted.
  • But according to the BofA, we don't have to fear that with AI: "We believe AI is different because the key players are global cloud service providers and enterprises, as opposed to primarily start-ups that focused on the consumer market during the Internet and VR bubbles."
  • That there are different ideas about tech companies' stock prices is also illustrated by statements about U.S. chipmaker Nvidia, which saw its stock valuation soar to unprecedented heights.
    • Since Microsoft is co-investing, the company could be an example of what the BofA is arguing. At the same time, others, such as influential investor Michael Burry, are speculating on a share price decline.

(evb)

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