To The Moon

After briefly becoming the world's most valuable company, the share price of AI chip giant $NVIDIA Corp(NVDA)$ has been sliding for three straight days, maybe entering a correction phase. In the last three trading days, Nvidia's share price has dropped over 12%, erasing about $430 billion in market value.

Oliver Cox, the head of Morgan Stanley's Asia fund, said:

Asian chip stocks are undervalued compared to their US counterparts, indicating greater growth potential. With the booming AI technology, sales of Asian chip supply chain companies will surge. And in the past five years, our Asia fund has outperformed 97% of its peers in the industry.

We've seen the valuations of major US chip companies skyrocket, while those of supply chain companies in the Asia-Pacific region have grown relatively modestly. This shows that these companies still have plenty of room to catch up.

Even though Nvidia has faced three days of selling pressure after its record rally, the $Philadelphia Semiconductor Index(SOX)$ still has a forward price-to-earnings ratio of 28 times, way above the five-year average of 20 times.

Meanwhile, the forward price-to-earnings ratio of major Asian chip companies stands at just 17 times, and the valuation gap between the two has reached its widest since 2009.

Cox predicted that Asian semiconductor companies will benefit from the AI server demand led by Nvidia, which will drive demand for key components like high-end memory chips and more conductive substrates.

Given the rapid development of AI technology, Asia's cutting-edge production bases are crucial to achieving these ambitious goals.

$Taiwan Semiconductor Manufacturing(TSM)$ , the world's only manufacturer of the most advanced chips, is the largest holding in Morgan Stanley's Asia fund, accounting for 9.6%. Korean chipmakers $Samsung Electronics Co., Ltd.(SSNGY)$ and $SK Hynix, Inc.(HXSCF)$ also rank among the top six holdings.

As for TSMC, its share price has surged over 58% this year, while its major customer Nvidia's share price has soared 138%. In contrast, Samsung's share price has only increased by 2.6%. Whoa, that's some serious growth!