Editor's Choice: Nvidia and Asia's three chip giants cash in on AI gold rush
Akito Tanaka shares his weekly reflections and recommendations
Nvidia founder and CEO Jensen Huang joined U.S. President Donald Trump's delegation for a summit with Chinese leader Xi Jinping. © Reuters
Hello from Tokyo. Nvidia, the U.S. chip behemoth that has been the biggest beneficiary of the AI boom, has once again reported record-breaking quarterly earnings. Its net profit tripled year-on-year, reaching nearly twice the level of key customers such as Microsoft and Amazon. During California's 19th-century gold rush, those who made the most reliable profits were the producers of picks and shovels. The same dynamic is playing out in the 21st-century AI boom. High-performance semiconductors, the essential tools for developing and operating AI, are today's "picks and shovels."
The boom is also generating enormous profits for Asia's three chip giants. Taiwan Semiconductor Manufacturing Co. (TSMC), which counts companies like Nvidia among its customers, and South Korea's Samsung Electronics and SK Hynix, both key producers of high-performance memory used in AI data centers, have all reported astonishing earnings.
Among them, SK Hynix stands out in profit-making. With its strong share in high-bandwidth memory (HBM), used in AI servers, the company posted an operating margin exceeding 70% in its most recent quarter, fully capitalizing on the chip bonanza.
Investor expectations for growth have driven sharp rises in valuations in recent years. Nvidia's market capitalization has reached $5 trillion, making it the world's most valuable company at about 18 times the market cap of Toyota, the globe's largest automaker. TSMC is valued at around $1.8 trillion, Samsung Electronics has surpassed $1 trillion, and SK Hynix is also approaching the "trillion-dollar club."
Despite these unprecedented profit levels and soaring stock prices, stakeholders don't appear to be broadly benefiting, particularly in South Korea. Labor tensions have intensified at Samsung, where unions negotiated with management under the threat of strikes. As wealth continues to concentrate amid the boom, debate is growing over how those gains should be distributed.
History shows that the semiconductor industry is highly volatile, with boom cycles driven by surging demand and supply shortages, followed by downturns caused by excessive investment. There is little doubt that we are currently in the largest boom phase the industry has ever seen. For the latest updates on Asia's three chip giants and in-depth analysis of the semiconductor supply chain, visit Nikkei Asia.
1. Japan's automakers have appeared asleep at the wheel as Chinese rivals have overtaken them in electric vehicles and staged an in-car technological revolution. This week's Business Asia looks at their belated response: expensive strategy pivots, greater collaboration and a focus on new markets and export hubs such as India.
2. Funds are flowing into South Korean government bonds and Vietnamese stocks following decisions by index providers to upgrade ratings or add local names to their global indexes. Conversely, Indonesia's stock market has been hit by capital outflows due to perceptions that market reforms there have been insufficient. The moves underscore how index providers' assessments of markets now significantly influence market valuations.
3. Five years after the Philippine central bank opened the banking sector to digital players, the newcomers are struggling both to make money and dent the traditional lenders' grip on the market. While they are managing to attract depositors with robust savings rates, convincing people to borrow from them is proving much harder because of the high lending rates they are compelled to charge.
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