Despite doubts over the high valuation of the technology industry, a Taiwanese technology fund remains bullish about the continued driving force of AI for the semiconductor industry.
According to the financial news app, Uni-President Asset Management Corp's Sam Kuo-managed UPAMC New Asia Technology and Energy Fund achieved 45% growth this year with a size of 1.37 billion New Taiwan dollars (approximately 42 million US dollars), surpassing 98% of peer funds. The fund's core holdings include Nvidia (NVDA.US), Taiwan Semiconductor (TSM.US), and Micron Technology (MU.US).
Kuo believes that there is currently no tech bubble. He further pointed out that although the profit expectations of some companies have only been raised by 20% to 30%, there is even room for valuation growth of 60% to 70%, providing sufficient space for profit growth.
However, technology stocks have recently performed poorly, partly because the market is concerned that the escalation of geopolitical risks may lead to tighter trade restrictions on the semiconductor industry. For example, the stock price of Japanese chip equipment manufacturer Tokyo Electron Ltd. fell 11% last Thursday, marking the biggest two-day drop since 2015. Meanwhile, the stock prices of Korean memory manufacturer Samsung Electronics and Taiwan Semiconductor have also declined to varying degrees. In addition, as the possibility of Trump's re-election as President of the United States increases, the market's concerns about geopolitical and trade risks have also intensified.
In the face of these challenges, Kuo chose to increase his focus on Taiwanese and Japanese stocks, reflecting his consideration of geopolitical risks. He emphasized that about 60% of the fund's funds will continue to invest in Asia, especially high-quality companies related to AI, rather than just companies related to consumer electronics.
Although chip stocks have performed strongly this year, with the Bloomberg global semiconductor index rising about 53%, some analysts have begun to express concerns about the overheated market. For example, Nvidia was downgraded by New Street Research after its stock price rose, and its P/E ratio has now reached 71 times.
However, Kuo is not overly concerned about valuation issues. He believes that a company's profit-making ability is the key. He believes that over time, tech companies' earnings will continue to grow, and valuations will gradually return to normal levels.
Last week, TSMC announced quarterly earnings that exceeded expectations and raised its revenue forecast for 2024, showing its steadfast confidence in the sustained spending boom on global AI. Other large semiconductor companies in Asia, such as Tokyo Electron Ltd., will also soon report their earnings.
In addition to directly investing in AI or semiconductor stocks, Kuo also focuses on industrial companies related to these areas. For example, Meidensha Corp., a company that produces lightweight machinery including power generation and water treatment systems, is held by the fund.
Kuo pointed out, "When we consider the AI chain, investors are easily reminded of semiconductor equipment and materials, but at the same time, we are also concerned about power shortages." He added, "So we are indeed looking for opportunities to invest in power grid equipment in Korea and Japan."
In the current politically dominated news cycle, Kuo believes that the long-term development of AI will not be affected by the results of the US election.