Asia Chip Stocks Gain After Nvidia Signals Booming AI Demand

By Kosaku Narioka

Shares of Asian chip makers rose Thursday after strong earnings from Nvidia buttressed expectations of booming global demand for semiconductors used in artificial intelligence.

In Japan, SoftBank Group, the parent of British chip designer Arm Holdings, advanced 5.1% while chip-making equipment maker Tokyo Electron Ltd. climbed 6.0%.

Elsewhere, South Korean memory-chip maker SK Hynix, which supplies to Nvidia, was 4.5% higher, Taiwan Semiconductor Manufacturing Co. added 1.6%, and Cambricon Technologies, a Chinese AI chip developer, was up 10% in Shanghai trading, making it one of the top gainers in Asia among companies with market capitalization of more than $5 billion.

Nvidia's results overnight showed that massive spending to build AI systems remains strong, with the U.S. chip maker scrambling to meet demand. Its fourth-quarter revenue more than tripled compared with the same period a year earlier to $22.1 billion, beating analyst forecasts for around $20.4 billion. Net profit jumped eightfold to $12.3 billion.

Nvidia's results are a bellwether for the strength of the AI boom, with tech giants like Microsoft, Google and Apple placing large bets on the technology and in need of Nvidia's hardware to drive them.

Arm, which is 90% owned by SoftBank Group, is cashing in on surging investments in AI. While the company's circuits are dominant in mobile phones, it is branching into chips used in data centers where AI computations are made.

Tokyo Electron earlier this month raised its revenue and profit forecasts for the fiscal year ending March, citing clients' needs for capital expenditures. It added that capital investment in chip-making equipment is showing signs of bottoming out, and that inquiries about equipment for generative AI applications are rising.

Last month, TSMC, the world's largest contract chip maker and a supplier to companies including Nvidia, Apple and Qualcomm, forecast a more than 20% rise in sales this year on rising demand for high-end chips.

Everything isn't roses for Nvidia. Nvidia's finance chief said on a call with analysts that sales of AI chips to China declined significantly in the fourth quarter due to U.S. government restrictions.

Bernstein senior research analyst Qingyuan Lin said the drop in sales in China would create room for local players to take market share.

--Jiahui Huang and Kwanwoo Jun contributed to this article.

Write to Kosaku Narioka at kosaku.narioka@wsj.com

(END) Dow Jones Newswires

February 22, 2024 01:28 ET (06:28 GMT)

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