Affected by the "AI bubble," related stocks in Singapore have recently come under pressure, with declines of up to 8.39% | Lianhe Zaobao
Affected by the "AI bubble," semiconductor-related stocks in Singapore have recently come under pressure, with declines of up to 8.39%. Analysts believe that concerns over the AI bubble may persist in the short term, leading to cautious investor sentiment. Frencken Group and Yongka Holdings saw their stock prices drop by 8.39% and 8.29%, respectively. Companies like UMS Integration experienced stock price declines ranging from 1.35% to 7.14%, while Valuetronics' stock price rose by 1.79%
The "artificial intelligence (AI) bubble" has become a hot topic recently, as concerns about the overvaluation of AI-related sectors have led investors to withdraw from risk assets. Most semiconductor-related stocks in China have also come under pressure, with declines of up to 8.39% in the past month.
Analysts believe that concerns about the AI bubble may persist in the short term. In the absence of clear evidence showing that AI-related investments can drive revenue growth for chip manufacturers or large enterprises, or until the macro interest rate environment becomes clearer, investor sentiment is expected to remain cautious.
Frencken Group and AEM Holdings, which have semiconductor businesses, saw their stock prices decline by 8.39% and 8.29%, respectively, over the past month.
The stock prices of semiconductor equipment manufacturer UMS Integration, IoT and data communication equipment manufacturer Aztech Global, venture company Venture Corporation, and technology nanomaterials manufacturer Nanofilm fell between 1.35% and 7.14%.
The only stock that rose was Valuetronics, with a price increase of 1.79%.
Moomoo Singapore trading manager Tu Junxiang mentioned in an interview that if original equipment manufacturers pause production or adjust capital expenditures, companies with diversified end markets and long-term order backlogs will be in a better position than their peers that produce on an order basis.
He said, "Order backlogs help reduce the volatility of corporate earnings and are less sensitive to the amplification effects that the AI market may bring."
Analysis: AEM Holdings Faces the Greatest Risk Due to High Dependence on Intel
In the context of slowing capital expenditures in artificial intelligence, which locally listed companies may be the most affected?
Chen Qiuyi, a research analyst at FSMOne Singapore's research and portfolio management department, believes that AEM Holdings faces the greatest risk, primarily due to the company's high dependence on a single major client, Intel.
She said, "If Intel delays its AI planning, slows down testing progress, or adjusts capital expenditures, it will directly impact AEM Holdings' earnings outlook. Although the company's long-term prospects are optimistic, the high customer concentration still poses significant short-term risks."
Another company that relies on semiconductor manufacturing equipment suppliers Applied Materials and Lam Research, UMS Holdings, may also face certain risks.
Further Reading
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Chen Qiuyi stated that both companies focus on manufacturing wafer equipment and are sensitive to the pace of capital expenditure.
"However, Applied Materials and Lam Research have not issued negative guidance recently and emphasized that advanced wafer foundry and logic chip production remain stable, coupled with improvements in the memory market and sustained demand related to AI. This has somewhat reduced the downside risk for UMS Holdings."
Yang Zeming, a senior analyst in stock research at Industrial Bank, believes that the end demand for artificial intelligence remains strong, and local companies involved in semiconductor front-end manufacturing will benefit from the production of AI chips in the future.
The semiconductor manufacturing process can be divided into front-end and back-end. The front-end mainly involves wafer manufacturing and circuit patterning, while the back-end encompasses packaging and testing.
He said, "For the reasons mentioned above, it is unlikely that there will be an immediate slowdown in the field of artificial intelligence. For the companies we studied, their layout in AI chips will not have a significant impact on profitability."
Yang Zeming currently maintains a "Buy" rating on semiconductor equipment manufacturer UMS Integration, as the group's net profit in the third quarter increased by 1% year-on-year to 10.5 million, which helps support profit recovery.
The report from Industrial Bank's research indicates that UMS Integration is a long-term beneficiary of growth in the semiconductor industry. Short to medium-term growth momentum is expected to come from increased semiconductor equipment spending and new customer orders, as well as profit improvements.
Tu Junxiang stated that investors worried about the potential spread of an AI bubble to the local semiconductor or electronics industry should focus on companies with diversified businesses.
"When AI capital expenditure is robust, the AI semiconductor business of related companies typically performs well. If capital expenditure declines, their other businesses can effectively buffer the downside risk." Chen Qiuyi believes that investors can pay attention to Frencken Group, as the company's revenue sources cover sectors such as semiconductors, industrial automation, and healthcare, demonstrating strong resilience.
Tu Junxiang said, "Frencken Group's diversified layout enhances business resilience and has the ability to buffer fluctuations in AI spending. This acts as a natural hedging mechanism; if the industry experiences a downturn, the company can increase the proportion of non-AI business."
