JP Morgan Fund continues to be optimistic about Asian semiconductor stocks: valuations are much lower than their American counterparts, with room for catching up

Amidst the sharp pullback of NVIDIA, the JPMorgan Asia Pacific Equity Fund continues to be bullish on Asian chip stocks, believing that their relatively low valuations indicate further upside potential. On June 25th, Oliver Cox, co-manager of the $1.2 billion JPMorgan Asia Pacific Equity Fund, forecasted that with the ongoing AI boom, sales growth of companies in the chip supply chains in China, Taiwan, Japan, and South Korea will accelerate. Data shows that the fund's investments in Asian chip stocks over the past five years have outperformed 97% of its peers. Cox stated, "While we have seen significant revaluation of major US chip companies, we have not seen many companies in the Asian supply chain undergo such a significant revaluation, so I believe there is still room for catch-up in Asian chip stocks." Despite NVIDIA's three consecutive days of sharp declines after hitting a record high stock price, the Philadelphia Semiconductor Index's forward P/E ratio is still around 28 times, higher than the five-year average of 20 times. The Bloomberg index tracking the P/E ratios of major Asian chip companies is around 17 times. The valuation gap between the two is close to the largest since 2009. At the same time, Asia plays a crucial role in the global chip industry supply chain. Cox mentioned that the "frontline" production bases of the chip industry are almost all located in Asia, and with the accelerated development of AI, these production bases will be key to achieving the industry's ambitious goals. According to the prospectus in April, TSMC is the largest holding in Cox's managed fund, accounting for 9.6%. South Korean chip manufacturers Samsung Electronics and SK Hynix are also among the top six holdings. TSMC's Taiwan-listed shares have risen by over 58% this year, while the stock price of its major customer NVIDIA has risen by 138%. Despite many Asian chip companies having performed well following NVIDIA's lead, Cox still believes there is upside potential for Asian chip companies. He said, "We believe there is still room for growth. The industry cycle still seems relatively early." In 2023, Cox was already a strong advocate for Asian chip stocks. At that time, he anticipated that AI is expected to become a greater driver of profit growth for Asian companies, and the AI order boom in Asian companies may continue throughout the full year of 2024 In addition to lower valuations compared to US chip stocks, Korean suppliers may also benefit from the shortage of DRAM memory. Investor pricing will begin to reflect Asian companies receiving more AI orders, driving up their valuations. Recently, Morgan Stanley also raised its ratings for the chip industry in China and Japan. Its analysts believe that the deflation in the tech industry, price elasticity, coupled with the long-term semiconductor industry demand brought by AI, are expected to jointly usher in a logical upturn cycle in the semiconductor industry