While investors’ attention is focused on artificial intelligence (AI) semiconductor stocks, analysts..

AI Investment Emerges ‘Power Devices’ in Next Week
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“Positive Performance Outlook, Lower Value Burden”

While investors’ attention is focused on artificial intelligence (AI) semiconductor stocks, analysts say that the stock market should pay attention to power device stocks as the next lead in the AI investment cycle. Unlike semiconductor stocks, power device stocks have recently been adjusted to relieve some of the price burden, while global power device companies’ performance prospects are rising.

According to the financial investment industry on the 27th, major domestic securities companies such as Mirae Asset Securities, KB Securities, Eugene Investment Securities, and LS Securities predicted that the increase in electricity demand due to the expansion of investment in AI data centers will support profit growth in the power device industry such as transformers, distribution devices, and energy storage devices (ESS) in the mid to long term.

In particular, the announcement of the U.S. Big Tech performance is considered a key variable that will determine the direction of power device stocks. This is because if Microsoft, Meta, Alphabet, and Amazon maintain or expand their AI data center investment plans, expectations for orders from related companies such as transformers, circuit breakers, and distribution boards could increase.

Hwang Sung-hyun, a researcher at Eugene Investment & Securities, said, “AI competition is no longer determined only by graphics processing unit (GPU) performance, and the ability to secure affordable and stable power will be a key competitive edge that will determine data center investment costs and AI service costs.”

Earnings Outlook ‘Clean’ Despite Stock Price Adjustment…This is the timing?

In terms of the recent stock price trend, power device stocks are relatively marginalized compared to AI semiconductor stocks. This is attributed to the increased burden of higher valuation than global competitors and the shift of investors’ interest to information technology (IT) hardware.

The stock market is paying attention to such a mixed stock price correction and earnings outlook. Although stock prices have taken a break, demand in the power device market and the outlook for corporate profits are still strong, and some advise that such a situation should be used as an opportunity to buy.

Kim Min-kyu, a researcher at KB Securities, said, “Power devices have played a role of ‘second-in-command’ following semiconductors in the AI investment cycle, but semiconductor stocks and stock prices have split since May,” adding, “If you look at the performance outlook of overseas companies, it is likely that they will open up the possibility of surprise when raising estimates or announcing earnings of power device industries along with the preview of the second quarter.”

Sung Jong-hwa, a researcher at LS Securities, said, “The current power device industry should not be viewed as a short-term economic cycle but as a long-term growth phase in which energy conversion and AI investment are combined.”

Look for a latecomer instead of just looking at the lead…In the long run, ‘power semiconductors’ are also noted

Yeouido Stock Street [Yonhap News]

It is advised that the investment strategy for power devices should also move from simple pursuit buying centered on large stocks to discover latecomers with a large valuation gap. As the valuation of large power equipment stocks has already increased, it is interpreted that the strategy to find latecomers is effective in the future.

“The saturation of order balances by leading companies will spread opportunities throughout the value chain, given that the supply of the power device industry is difficult to increase rapidly in line with demand,” said Park Hee-chul, a researcher at Kyobo Securities. “Small and medium-sized companies with proven technology can enter new markets or increase their market share as the delivery date of large global companies increases and the need to diversify supply chains increases.”

Some predict that the benefits of investment in power infrastructure will lead to “power semiconductors” in the long run.

“The rapid increase in power consumption of AI servers will speed up the transition to an 800-volt (V) high-voltage power system,” said Park Ki-hyun, a researcher at Kiwoom Securities. “High value-added parts makers such as silicon carbide (SiC) and gallium nitride (GaN)-based power semiconductors and power management chips are likely to emerge as new beneficiaries.”