Nvidia’s Asian suppliers rally on positive AI-fuelled outlook

Investing.com -- Shares of major Asian Nvidia Corp (NASDAQ:NVDA) suppliers rose sharply on Thursday, tracking an overnight rally in the graphics card maker on strong first-quarter results and a positive outlook on chip demand amid growing interest in artificial intelligence.

Japan’s Advantest Corp (TYO:6857), which supplies semiconductor testing technology to Nvidia, was among the best performers for the day, rallying 16% to a record high. 

Taiwan Semiconductor Manufacturing Corp (TW:2330), the world’s largest chipmaker by production and a major Nvidia supplier, also jumped over 3%, while South Korea’s SK Hynix Inc (KS:000660) surged nearly 5%. 

Optimism over Nvidia spilled over into other Asian chipmaking stocks. Japanese semiconductor players Nippon Electric Glass Co Ltd (TYO:5214) and SUMCO Corp (TYO:3436) rose nearly 4% each, in turn helping the benchmark Nikkei 225 rise back towards 33-year highs hit earlier in the week.

Nvidia shares surged about 25% in after hours trading, as the world’s most valuable chipmaker logged a better-than-expected first-quarter profit. The firm also posited a stronger-than-expected second-quarter revenue forecast, citing increased demand from AI development.

The firm is seeing increased demand for its data center chips, which play a key role in powering the AI technology that saw a significant jump in popularity this year. Generative AI, which is used by tools such as startup OpenAI’s ChatGPT, uses past data to create new content such as text, images, and programming code.

The release of ChatGPT attracted over a million users in a week, and also ramped up speculation over what industries it could disrupt. 

Increasing demand from AI offers a respite to chipmakers, which were otherwise facing a slowdown in demand this year amid worsening global economic conditions. A chip shortage over the past two years saw global chipmakers greatly increase their production capacity, which then faced the risk of not offering enough returns on investment this year.

Majors such as TSMC and Samsung (KS:005930) had both warned of a demand slowdown this year as technology investment dries up, while Nvidia rival Advanced Micro Devices Inc (NASDAQ:AMD) had recently forecast quarterly sales below Wall Street expectations.