Summary: Goldman reiterates Buy on SK Hynix (PT 290,000 KRW) and Samsung Electronics (PT 74,000 KRW) on improving NAND industry conditions and stronger 2Q25 outlook vs Kioxia.

Goldman Sachs) APAC Tech: Kioxia’s 1Q25 Results and Outlook & Korean Memory Companies

On May 15, Japanese NAND manufacturer Kioxia announced its results for the first quarter of 2025 (the fourth quarter of its fiscal year 2024, March quarter). Here, we provide implications for our covered Korean memory companies (SK Hynix, Samsung Electronics, both rated Buy). In summary, Kioxia’s 1Q25 results were similar to those of the Korean players, while its 2Q25 guidance (due to company-specific reasons) was somewhat weaker than that of its Korean peers. Kioxia indicated that tariff impacts will be limited in 2Q25; however, we expect Korean companies to see a certain level of front-loaded demand. Kioxia’s future outlook suggests improving NAND industry conditions.

1Q25 Results Similar to Korean Players (see Table 1):
Kioxia’s NAND pricing, bit shipments, and margin directions were similar to those of Samsung Electronics and SK Hynix. For all three, sharp declines in ASP (average selling price) and bit shipments quarter-on-quarter, along with customer inventory adjustments, led to deteriorating operating profit margins (OPM).
2Q25 Guidance Weaker than Korean Peers (see Table 1):
Kioxia guided for 2Q25 sales to change by -8% to +1% quarter-on-quarter (in USD terms, excluding FX impact), which is weaker than Samsung Electronics’ and SK Hynix’s NAND revenue growth forecasts (+14% and +21% qoq, respectively, in USD terms). We believe Kioxia’s weak guidance is due to “company-specific factors,” as Kioxia noted that customers are transitioning from BiCS Flash Gen 5 to Gen 8, resulting in some demand softness.

Tariff Impact Likely to Be Limited:
The company stated there was no tariff impact in 1Q, and while there may be some front-loaded demand in 2Q due to partial tariff issues, the tariff impact is expected to be minor, with a margin impact of about 1%. We believe there was no special tariff-related front-loaded demand for Korean players in 1Q (actual NAND shipments were similar to guidance), but we expect to see some front-loaded demand in 2Q.
Maintaining Strict Capex Plans:
The company continues to maintain a strict capex plan and will flexibly adjust production according to market conditions. This year, there will be no large-scale infrastructure capex, and equipment investment will focus on ramping up BiCS Flash Gen 8 mass production and responding to demand for large-capacity SSDs for AI.

Outlook for NAND Industry Improvement:

1. Kioxia stated that NAND prices have bottomed out and some segments are showing signs of improvement.

2. Smartphone and PC inventories have begun to stabilize, but the pace of inventory normalization in 2025 is difficult to predict due to macro uncertainty.

3. Enterprise and data center demand remains solid thanks to expanding AI adoption.

SK Hynix 12M target price: 290,000 KRW (based on 2.0x target PBR on average 2025 BVPS)
Key downside risks: severe deterioration in memory supply-demand / delay in technology migration

Samsung Electronics 12M target price: 74,000 KRW / Preferred stock target price: 61,000 KRW (18% discount to common stock)
Target price based on 2025E SOTP using EV/EBITDA

Key downside risks: severe deterioration in memory supply-demand / severe deterioration in smartphone profitability / decline in mobile OLED market share


structural marker; pre-classified as canonical yfinance ticker


Summary: Author calls Hynix undervalued and cites Macquarie's KRW 360,000 PT implying 42% upside.

"Hynix shares are still undervalued."

Macquarie has set the most aggressive price target for Hynix at the moment — KRW 360,000.

---

Hynix's current share price is KRW 252,000, which means Macquarie sees up to 42% upside from here.


Summary: BofA sees NVDA maintaining 1-2 gen lead in AI scale-up networking while UALink completes AMD's system portfolio; NVLink Fusion unlocks ~$12B TAM.

BofA) AI Interconnects Post-2026: NVLink Fusion vs. UALink

UALink aims to challenge NVLink’s dominance in AI scale-up

We review two major AI scale-up interconnect protocols recently announced: 1) NVIDIA’s NVLink Fusion and 2) Ultra Accelerator Link (UALink), an open standard supported by AMD, Broadcom, and other ecosystem players. These two technologies are core scale-up technologies that allow AI accelerators (GPUs, ASICs, etc.) to connect via fast, low-latency shared memory networking and scale to large rack-scale systems. Importantly, UALink represents the industry’s latest effort to catch up to NVIDIA’s proprietary and closed NVLink technology, which has been a key competitive advantage for NVIDIA in building large-scale rack-level systems. Although UALink is generally one to two generations behind NVLink, we see it as a significant development that could enable the non-NVIDIA ecosystem to challenge NVIDIA’s dominance in AI scale-up starting in 2027. Until then, we expect NVIDIA to maintain its leadership across chips, software, and system/rack-level design. Meanwhile, NVIDIA’s NVLink Fusion partially opens NVLink IP to selected ecosystem partners (notably excluding Broadcom and AMD), unlocking a ~$12B networking TAM linked to custom CPUs/accelerators that NVIDIA previously could not access.

AMD’s system-level portfolio completed with UALink

UALink leverages AMD’s Infinity Fabric technology as a standard protocol, supporting features like shared memory coherency between CPU and GPU. AMD was a founding member of the UALink consortium and has contributed to building the supporting ecosystem, including related silicon IP, validation, and software. Importantly, UALink completes AMD’s system-level portfolio consisting of hardware (MI Instinct), software (ROCm), rack solutions (ZT Systems), scale-up (UALink), and scale-out (Ultra Ethernet). With the MI400 generation targeted for the second half of 2026, AMD plans to begin designing rack-level AI systems using ZT Systems technology, and UALink will provide much-needed intra-rack accelerator interconnect and switching functionality.

NVIDIA and NVLink remain ahead

However, the latest UALink 1.0 standard (expected to be adopted in systems in 2027) supports up to 800GB/s of bandwidth per accelerator—less than half of the 1.8TB/s offered by the latest NVLink 5.0 (see Table 6 for details). Even in terms of total aggregated bandwidth (per pod), UALink 1.0 supports a maximum of 819TB/s, which is only comparable to NVLink 5.0’s 1,000TB/s expected in Q4 2024. UALink-compatible systems are expected to roll out in earnest starting in 2027—coinciding with the expected launch of NVIDIA’s NVLink 6.0-based Rubin systems. Therefore, we believe NVIDIA is likely to maintain a one to two generation lead in AI scale-up networking.

NVLink Fusion unlocks ~$12B TAM in custom systems

Meanwhile, NVLink Fusion can expand NVIDIA’s TAM in the networking segment connected to custom accelerators. We assume that custom silicon will account for about 15% (~$75B) of the $500B AI computing TAM by 2029-30, with AI networking comprising around 15% ($11B) of that segment. Similarly, NVLink Fusion opens opportunities for NVIDIA-based networking in ARM CPU systems (e.g., Qualcomm/Fujitsu), offering an additional ~$1B networking TAM (15% of the ~$5-6B ARM CPU TAM). Through NVLink Fusion, all end customers (hyperscalers) will be able to choose between NVLink and UALink for their silicon, providing NVIDIA with further opportunities.


UALink completes AMD's system-level portfolio consisting of hardware (MI Instinct), software (ROCm), rack solutions (ZT Systems), scale-up (UALink), and scale-out (Ultra Ethernet)


Summary: Shares JP Morgan note: prefer Samsung near-term (3–6m) for downside protection, SK Hynix mid-to-long-term (6–12m+) on HBM/AI leadership.

JP Morgan: Memory TAM Revised Downward

• Memory TAM Revision for 2025–2026: Adjusted downward by -1% for 2025 and -5% for 2026 to reflect U.S.-China tariff risks
• Preference for DRAM and HBM: AI demand driving higher share of DRAM (especially HBM); AI-related demand expected to account for 40% of total DRAM TAM
• Relatively Weak NAND: Limited AI impact and weak consumer electronics demand leading to reduced content growth

⸻

🧠 HBM Market Outlook

• HBM Demand Growth Adjustment: 2025 forecast revised slightly from +122% → +122%, and 2026 from +52% → +47%
• 2026 Supply Adjustment: TSV capacity cut due to CoWoS bottlenecks and slower ASIC demand → 7% reduction in HBM supply
• Expected Inventory Build in 2026: About 6 weeks’ worth of inventory expected to accumulate, but at manageable levels

⸻

💾 DRAM/NAND Pricing Outlook

• DRAM: Strong in 1H25 due to pull-in from server and PC demand, but ASP expected to decline starting 4Q25
• NAND: Prices to continue falling through 2Q25, rebound in 3Q25, and stabilize in 4Q25 due to supply adjustments

⸻

📉 Demand Outlook (2025–2026E)

• Smartphone Shipments: -3% in 2025, -5% in 2026
• Notebook Shipments: -3% in 2025, -10% in 2026
• Server Shipments: -2% in 2025, -6% in 2026

⸻

🏗 Capex

• SK Hynix: DRAM Capex raised (W19T → W22T), reflecting M15X line and HBM backend conversion
• Samsung Electronics: DRAM +10%, NAND +30% increase; continued aggressive NAND investment

⸻

📊 Stock & Investment Strategy

• Short-term (3–6 months): Prefer Samsung Electronics (SEC) — strong downside protection in case of recession
• Mid-to-Long-term (6–12+ months): Prefer SK Hynix — sustained AI upside based on HBM leadership
• Ultra-short-term (1–3 months): NYT may rebound — benefits from strong commodity DRAM pricing

⸻

📌 Conclusion & Risk Factors

• Positive Factors: Resilient AI demand, limited DRAM/HBM supply, focus on high-margin products
• Negative Factors: Potential demand shock and ASP decline if tariffs intensify, weak NAND demand
• Neutral View: Memory fundamentals attractive in the long term, but short-term correction risks remain


Mid-to-Long-term (6–12+ months): Prefer SK Hynix — sustained AI upside based on HBM leadership


Summary: Shares J.P. Morgan's bullish Broadcom projections: 38% EPS growth in FY2025, 25% in FY2026, FCF $39B, net debt declining sharply.

J.P. Morgan projects Broadcom's EPS to increase by 38% year-over-year to $6.71 in fiscal year 2025, followed by a further 25% growth to $8.38 in 2026. Free cash flow is expected to reach $39 billion in 2026, and the net debt-to-equity ratio is forecast to decline from 0.9 in 2024 to 0.2 in 2026, indicating a robust financial position.


demand for high-performance computing chips driven by AI applications remains strong. Advanced process technologies and advanced packaging are the main drivers of global foundry industry growth. The industry's annual growth rate is expected to reach 19.1% in 2025

Summary: Shares TrendForce bullish foundry outlook: 19.1% industry growth in 2025, 2nm mass production H2, advanced packaging up 76%; implicitly long TSM.

【TrendForce: Global Foundry Industry to Grow 19.1% in 2025】

At the recently held “TSS 2025 Semiconductor Industry Executive Forum” hosted by TrendForce, Guo Zuorong, Senior Deputy General Manager of Research at TrendForce, stated that demand for high-performance computing chips driven by AI applications remains strong. Advanced process technologies and advanced packaging are the main drivers of global foundry industry growth. The industry’s annual growth rate is expected to reach 19.1% in 2025.
In addition, 2nm advanced process technology will officially enter mass production in the second half of this year, and advanced packaging capacity will continue to expand, with an expected annual growth of 76%.
$TSM


We maintain our 'Buy' rating on TSMC, with a 12-month target price of NT$1,145... For ADR (American Depositary Receipt, TSM), our 12-month target price is US$229

Summary: Shares Goldman Sachs Buy on TSMC/TSM, PT US$229 ADR / NT$1,145, on CoWoS growth, advanced node transition, and 26% revenue growth in 2025.

Goldman Sachs TSMC Analysis

1. Improving Sentiment and Limited Downside Risk to Earnings

Easing supply chain mismatches, lower probability of AI order cuts

1. Limited downside risk to earnings at this juncture – We believe the likelihood of further earnings downside for TSMC is limited following our last earnings estimate revision, which accounted for unfavorable foreign exchange trends and revised CoWoS (Chip-on-Wafer-on-Substrate) outlook.

2. Easing concerns on further AI order cuts – Supply chain mismatches between upstream/downstream are easing as assembly yields of downstream ODM (Original Design Manufacturer) players improve.

3. Sustained strength in CoWoS shipments – We expect TSMC's CoWoS shipments to grow strongly by 52% year-on-year from 585k in 2025 to 923k in 2026.

2. Strong Growth Outlook Heading into 2026

1. Advanced node transition to drive revenue growthWe forecast TSMC's revenue (in USD) to exhibit strong growth of 26.3%/14.1% in 2025/26, respectively.

2. Transition to more advanced nodesAI customers will transition from N4 (4nm) to N3 (3nm).Non-AI customers (mainly smartphone and PC) will transition to N2 (2nm), driving blended ASP upside.

3. The proportion of advanced nodes (7nm and below) in TSMC's wafer revenue will reach 79.3% in 2026, up from 68.8% in 2024.

3. Expect Further Price Increases in 2026

1. Advanced node transition to drive revenue growthPrice increases for advanced nodes and CoWoS to offset rising costs

2. We expect the average selling price (ASP) of 5nm and below nodes/CoWoS to increase by 3%/5% year-on-year, respectively, in 2026.

・This will offset rising costs due to higher public utility charges in Taiwan and accelerated fab expansion in the US.

3. Gross margin (GM) will remain at 56.8%/54.7% in 2025/26, respectively, which is above the long-term profitability target of >53%.

4. Recommendation, Target Price Risks, and Valuation Methodology
Target Price

We maintain our 'Buy' rating on TSMC, with a 12-month target price of NT$1,145, derived by applying a target P/E (price-to-earnings) multiple of 20x to our 2026 estimated EPS (earnings per share).

The target P/E of 20x represents +0.5 standard deviation above the 5-year average trading P/E.
For ADR (American Depositary Receipt, TSM), our 12-month target price is US$229, derived by applying a USD/TWD exchange rate of 30.0 and a 20% ADR premium.

5. Key Risks

1. Further deterioration in end-demand recovery impacting utilization rates.
2. Slower-than-expected adoption of process transitions by customers.
3. Unfavorable foreign exchange trends or higher-than-expected cost increases weighing on margin outlook.

$TSM


Summary: Shares Morgan Stanley bullish survey: TSMC CoWoS +33% in 2026 supports NVDA/AI ASICs; Alchip sole Trainium3 provider with strong 2026 revenue growth; Marvell growth tied to Trainium2 lifecycle.

Semiconductor Survey: CoWoS Expansion Drives Computing Chip Growth, B30 Export to China a Key Variable

Morgan Stanley (C. Chan, 25/06/30)

Morgan Stanley's survey indicates that TSMC's CoWoS capacity is expected to grow by over 30% in 2026, which will support the NVIDIA and AI ASIC supply chains. Chinese AI demand is strong but constrained by hardware supply, and whether B30 GPUs can be exported to China remains the biggest uncertain factor. Meanwhile, Asian ASIC design service providers like Alchip are showing positive growth prospects due to AWS custom chip orders.

TSMC CoWoS Capacity to Grow 33% in 2026, Driving GPU and ASIC Chip Demand

Morgan Stanley has upgraded its forecast for TSMC's CoWoS capacity in 2026 to 90,000-95,000 wafers, an increase of approximately 33% from the 70,000 wafers at the end of 2025. Among these, CoWoS-L capacity may increase to 68,000 wafers, reflecting strong demand for Blackwell or Rubin chips. Concurrently, the testing time for Blackwell chips is expected to increase to 800-900 seconds, verifying the rising complexity of testing, with KYEC maintaining its leading share.

Strong Demand from Chinese AI Developers, But Limited by B30 GPU Supply and Training Capacity Bottlenecks

Although Chinese developers are aware of NVIDIA's B30 chip (RTX 6000 Pro), there is currently no official order confirmation. Taiwanese supply chain sources indicate that 2 million B30 chips are expected to begin tape-out in the second half of 2025. If export to China is not possible, some developers plan to switch to Huawei's 910C chip, but the latter is not yet readily available. Some developers are delaying capital expenditures until the availability of B30 is clear, while local ASICs can currently only be used for inference tasks.

Delay in China's Next-Generation Large Model Training Attributed to Restricted GPU Resources

Morgan Stanley's survey found that progress in training large AI models in China is lagging, mainly due to a shortage of GPU training compute power. While inference demand is more active, training resources remain a bottleneck, impacting the overall pace of AI deployment.

Bullish on Asian ASIC Design Service Providers, Alchip Expected to Benefit from AWS Trainium3 Orders

For AWS's custom chip Trainium3 project, Alchip is the sole service provider, and is expected to see significant revenue growth in 2026. The actual scale will depend on TSMC's 3nm and CoWoS capacity allocation. Marvell, on the other hand, is focusing on "XPU-attach" chips, and its growth will depend on the lifespan of Trainium2 and the shipment volume of its attached chips. Morgan Stanley expects the design service provider for Trainium4 to be selected in July, with Alchip having a higher chance of winning.

Investors Generally Positive on AI, But Focus Shifts to Demand Sustainability and Alternative Investments

In this survey, investors are generally optimistic about the AI sector, but their focus has shifted to the sustainability of future demand and the selection of investment targets beyond NVIDIA. This reflects the market's further discernment and positioning regarding the return on AI capital expenditure and beneficiaries in the mid-stream of the industry chain.


will support the NVIDIA and AI ASIC supply chains


Alchip is the sole service provider, and is expected to see significant revenue growth in 2026


Marvell, on the other hand, is focusing on 'XPU-attach' chips, and its growth will depend on the lifespan of Trainium2 and the shipment volume of its attached chips


Summary: Morgan Stanley upgrades 2025 WFE to +6%, raises KLA/AMAT/LAM revenue forecasts; KLA is top GAA beneficiary, AMAT stance turns positive on TSMC share recovery and China demand.

industry='Semiconductor Equipment & Materials'

Global Semiconductor Equipment: H2 Equipment Demand Rebounds Beyond Expectations, Driving Up Global WFE Forecast

Morgan Stanley (S. Brett, 25/07/01)

Morgan Stanley has upgraded its 2025 global WFE (Wafer Fab Equipment) forecast, primarily due to strong demand from China in the second half of the year, especially in the Foundry/Logic sector. Concurrently, it has raised its 2025 revenue forecasts for U.S. SPE (Semiconductor Production Equipment) manufacturers (KLA, AMAT, LAM), benefiting from TSMC's GAA production lines and increased equipment imports by China.

2025 Global WFE Forecast Upgraded from +2% YoY to +6%, China is the Main Contributor

Morgan Stanley has raised its 2025 global WFE market size forecast from $104 billion to $109 billion, increasing the year-on-year growth from 2% to 6%. The 2026 forecast has been slightly increased to $110 billion. This upgrade is primarily attributed to the Chinese market, with approximately $5 billion in new equipment spending, particularly in Foundry/Logic.

China's H2 WFE Spending Expected to Improve Significantly, Equipment Imports to Resume from July

Despite the lower capacity utilization rates of most Chinese manufacturers, Morgan Stanley notes that policy-driven investment momentum will be further unleashed in the second half of 2025. From January to May, China's semiconductor equipment imports decreased by 4% year-on-year, mainly from Japan, the US, Netherlands, and Singapore, with only Malaysia showing positive growth. However, a rebound is expected starting in July, and the second half trend will replicate the H/H (half-on-half) structure of 2024 (19% growth in 2H).

Upgrading KLA and AMAT's 2025 Revenue Forecasts for TSMC Projects and the Chinese Market

Morgan Stanley has greater confidence in KLA's leading position in GAA (Gate-All-Around) processes, raising its 2025/26 revenue forecasts from TSMC to $2.76 billion and $3.05 billion, respectively. AMAT also gained back market share at TSMC, with its 2025/26 revenue forecasts upgraded from $5.6/$5.26 billion to $5.93/$5.38 billion. During the same period, the expected share of revenue from the Chinese market for KLA/AMAT in 2025 was also slightly raised to 32%/28%.

Maintaining KLA as the Biggest Beneficiary of GAA, Shifting to a Positive Stance on AMAT for 2025

While still cautious about AMAT's DRAM-related prospects for 2026, Morgan Stanley's outlook for AMAT in 2025 has turned more positive, driven by the regaining of TSMC share and the recovery of equipment demand from China. At the same time, it continues to emphasize that KLA possesses the strongest competitiveness in the GAA development trend and will be the biggest beneficiary of this process evolution.

Overall Semiconductor Equipment Spending Momentum Driven by China, U.S. Manufacturers Directly Benefiting

Morgan Stanley points out that the key to the global WFE rebound in 2025 comes from China's push for inventory replenishment in the second half and new project drives. U.S. SPE manufacturers will be the most direct beneficiaries, with TSMC and mainland China forming a dual pulling factor. The firm still notes that the uncertainty of the future DRAM cycle could cause disruptions in 2026.


Morgan Stanley's outlook for AMAT in 2025 has turned more positive, driven by the regaining of TSMC share and the recovery of equipment demand from China


it has raised its 2025 revenue forecasts for U.S. SPE (Semiconductor Production Equipment) manufacturers (KLA, AMAT, LAM)


Summary: Bullish large-cap Korean memory stocks (Samsung, Hynix) into 3Q25 on HBM demand extension, commodity DRAM shortage, and foreign buying momentum through 2026.

Buying Semiconductors: Expectation Extended to 2026
[Samsung Securities Semiconductor, IT / Lee Jong-wook]

Foreigners' semiconductor buying spree has been formidable recently. Last night, as tensions in macro-level conflicts eased, the Philadelphia Semiconductor Index surged by 3%, and this momentum is driving up the stock prices of Samsung Electronics and SK Hynix.

What should we focus on and respond to?

1. Reflecting Next Year's HBM Expectations

The outlook for HBM demand next year is becoming even more optimistic. Negotiations for volume between NVIDIA and SK Hynix are further strengthening confidence in strong demand for 2026. Based on the launch of AMD MI350 and performance expectations for MI400, which is anticipated to rival Rubin, AMD and Samsung Electronics' stock prices are rejoining the AI rally. We believe that upward revisions to 2026 operating profits will be more positively reflected in stock prices. Focusing on 2026 further alleviates valuation burdens for investors.

2. Extension of Commodity Supply Shortages

Recent consecutive discontinuations of DDR4 by CXMT and Micron, Samsung Electronics' aggressive D1c capacity expansion, and memory manufacturers' limited Capex are further strengthening the belief in the sustained shortage of commodity memory. Threat factors to supply expansion are being removed one by one. We project mobile DRAM prices to rise by an average of 10% in 3Q25, following 2Q.

3. How Long Will This Last?

The core lies in belief in the next year and foreign buying momentum. Until recently, concerns about a "peak-out" dominated the market, but investment fever in data centers remains unabated. The period for investors to confirm relief for next year extends from the confirmation of full sales and tight supply from TSMC and SK Hynix in July to the strong demand from cloud companies to be verified in October. Sovereign AI is a catalyst stimulating the market in both Korea and globally. During this period, the market will adopt an even more optimistic view on future AI growth.

4. On AI Peak-out and the 2-Year Infrastructure Cycle

We do not believe AI is a bubble. However, infrastructure investment is only the beginning of a long-term AI cycle we will face. Various 'other' AI themes will stimulate the stock market going forward. While we feel this 2-year cycle is being extended due to sovereign AI, tariffs, and conservative investment trends in an uncertain macro environment, we still believe that the infrastructure investment cycle fundamentally considers variables based on a 2-year cycle.

5. Conclusion

It seems appropriate to adopt a more optimistic view for 3Q25. It's the same product, the same narrative, but for an extended period. The party continues until dawn. Considering foreign buying momentum and conservative investment, additional investments primarily in large-cap memory stocks are more attractive.

Thank you.

(Published on 2025/06/17)


Negotiations for volume between NVIDIA and SK Hynix are further strengthening confidence in strong demand for 2026


It seems appropriate to adopt a more optimistic view for 3Q25. The party continues until dawn.

Korea semiconductor sector proxied by EWY ETF


The investment rating remains Buy. The target price is raised to $180, maintaining the prior P/E multiple of 30x.

Summary: Shares Citi Buy reiteration on NVDA with PT raised to $180; expects margin expansion, trading-range breakout to new 52-week highs on Blackwell demand and upcoming catalysts.

Citi) NVIDIA Corp Analysis: Positive AI Outlook (“AI is A-OK”), Target Price Raised to $180

Citi’s View
NVIDIA reported its April quarter earnings in line with market expectations, and guided July quarter revenue of $45 billion, which is approximately $1 billion above expectations. This suggests that NVIDIA has passed the final transitional quarter following China’s H20 GPU export restrictions. Additionally, Blackwell product revenue reached $24 billion, surpassing Citi’s estimate of $20 billion. Management reaffirmed its target gross margin in the mid-70% range, supported by improving profitability in Blackwell and the absence of significant tariff impacts.

Accordingly, Citi expects NVIDIA’s margins to continue expanding through the January quarter and believes the stock is likely to break out of the trading range it has been stuck in since mid-last year and reach new 52-week highs. Citi also expects upcoming events—including its Silicon Valley Bus Tour next week and NVIDIA’s GTC event in Paris on June 11–12—to serve as positive catalysts. GTC, in particular, is expected to feature announcements on sovereign AI initiatives across European nations. NVIDIA emphasized that sovereign AI and AI factories will require tens of gigawatts in power, with a data center market opportunity of approximately $50 billion per gigawatt.
Citi maintains its FY2026 EPS forecast but raises FY2027 and FY2028 EPS estimates by 9% and 5%, respectively, to reflect improved gross margin assumptions. The target price is raised to $180, maintaining the prior P/E multiple of 30x. The investment rating remains Buy.

Citi’s In-House AI GPU Model Update

Shipments:
Citi maintains its prior GPU shipment estimates of 6 million units in FY2026 (+8% YoY) and 6.4 million units in FY2027 (+6% YoY). Based on stronger-than-expected Blackwell demand, findings from Citi’s Asia channel checks, and commentary from NVIDIA’s suppliers, Citi reiterates its expectation that Blackwell shipments in FY2026 will be 10x higher than the prior year. The full-year shipment estimate is based on TSMC’s CoWoS monthly capacity of ~70,000 wafers and NVIDIA being allocated more than 50%.

AI GPU Revenue:
Driven by shipment growth and a favorable product mix, Citi estimates FY2026 and FY2027 AI GPU revenues will reach $168 billion (+60% YoY) and $217 billion (+29% YoY), respectively. AI GPU sales are expected to account for the mid-to-high 80% range of NVIDIA’s overall Data Center revenue during FY2026–2027. The remaining contribution will come from networking (Ethernet and InfiniBand), standalone CPUs, and software/services.

Earnings & Guidance
In the April quarter, NVIDIA reported revenue of $44.1 billion and non-GAAP EPS of $0.96 (excluding stock-based compensation). EPS including H20-related costs and taxes was $0.81. This exceeded Citi’s forecast of $43.6 billion / $0.94 (ex-SBC) and also beat the FactSet consensus of $43.3 billion / $0.74 (inclusive of costs).

NVIDIA incurred $4.5 billion in costs related to excess H20 inventory and purchase obligations stemming from China’s export restrictions. This was below the previously expected $5.5 billion. H20 sales were $4.6 billion in the April quarter, prior to the restrictions, and an additional $2.5 billion in shipments were not fulfilled.
For the July quarter, NVIDIA guided revenue of $45 billion (midpoint), which is slightly below Citi’s estimate of $44.2 billion and the market consensus of $45.9 billion. This guidance reflects an ~$8 billion revenue loss from the H20 export controls.

Looking at other metrics, April quarter non-GAAP gross margin (excluding SBC) was 71.3%, slightly above Citi’s estimate of 71%. July quarter non-GAAP gross margin guidance is 72.0% (midpoint), in line with the market and 100bps above Citi’s expectations. NVIDIA reiterated its goal to maintain gross margins in the mid-70% range by year-end.

Segment Breakdown

Data Center (DC):
Thanks to the Blackwell launch, Data Center revenue rose 10% QoQ (vs. Citi/Street est. of +17%/+11%). With the transition from Hopper to Blackwell nearly complete, Blackwell accounted for ~70% of quarterly compute revenue of $34 billion. Citi estimates that the $24 billion Blackwell revenue corresponds to roughly 700,000 units sold.

Networking revenue re-accelerated, growing 64% QoQ and 56% YoY to reach $8 billion annually, driven by Blackwell and Spectrum-X. Notably, GCP and Meta are now Spectrum-X customers. Hyperscalers accounted for less than 50% of DC revenue. Citi sees the high mix of enterprise, sovereign AI, and consumer internet clients as positive and indicative of NVIDIA's efforts to expand beyond hyperscalers, especially in inference. According to management, inference workloads are growing rapidly. OpenAI, Microsoft, and Google have shown explosive growth in token generation. For example, Microsoft processed over 100 trillion tokens in Q1, up 5x YoY.
NVIDIA’s inference platform continues to attract customers due to its processing throughput and efficiency, especially as test-time scaling increases compute demand for inference workloads.
In networking, NVIDIA achieved $5 billion in Q1 revenue, up 64% QoQ. Growth spanned both scale-up and scale-out infrastructure.

• On the scale-up side, NVIDIA achieved $1 billion in NVLink revenue.

• On the scale-out side, it added two new customers for its Spectrum-X (Ethernet) portfolio.

Blackwell Detailed Analysis
NVIDIA continues to emphasize that Blackwell is the fastest product ramp in company history. While management didn’t disclose exact platform contribution for the quarter, commentary implies revenue was at least $24 billion, up from $11 billion last quarter.

Citi had forecast $20 billion for Blackwell this quarter and views the results positively. Citi believes demand for Blackwell significantly exceeds supply.
In fact, major suppliers like Wistron expect to ship 100–200 NVL servers per week in Q1, potentially tripling by June. Given the faster-than-expected adoption and deployment of Blackwell, Citi projects that July quarter shipments may exceed 900,000 units.
$NVDA


our conviction has only grown stronger... inference demand driven by token growth under conditions of supply shortage is deeply significant... alleviating the biggest concern around NVDA stock

Summary: Long NVDA: explosive token/inference demand is revenue-generating (not VC speculation), alleviating the key bear case; conviction has grown stronger.

Morgan Stanley: NVDA Commentary (Explosive Token Growth)

What truly matters in the long run is the explosive growth in tokens. We’ve written about this before, and our conviction has only grown stronger. Every hyperscaler has reported unexpectedly strong token growth. But our confidence doesn’t stem solely from these reports. Everyone we speak to in this space is surprised by the level of inference demand and says they are competing to secure GPUs.

LLM cloud customers, facing constrained GB200 supply, are asking cloud partners to expand capacity for Hopper and B200. Some cloud customers are listening, which explains the rising demand for those form factors. That said, due to multi-year ROIC (Return on Invested Capital) targets, there’s still some hesitation about adding more Hopper capacity right now.

This strength is unlikely to translate directly into a beat for the July quarter due to the constraints mentioned earlier. However, we believe the inference demand driven by token growth under conditions of supply shortage is deeply significant. This is not the result of speculative VC-funded mega-training clusters. It’s evidence that models are actually being used and are generating revenue—alleviating the biggest concern around NVDA stock, which is that all of this demand is being driven by eventually-exhaustible venture capital.

The strength we’re emphasizing here stems from usage—revenue-generating parts of the business—and shows clear signs that inference at scale is becoming a reality as the market shifts toward inference-oriented models.

$NVDA


Summary: JPM bullish on Nasdaq 100 to new ATH, NVDA on Jensen keynotes + strong AI demand, and AVGO on AI revenue well above consensus for FY25/26.

Nasdaq-100 index best proxied by QQQ ETF

J.P. Morgan) AI / MEGACAP TECH – Last Week Nasdaq 100 (NDX) and Philadelphia Semiconductor Index (SOX) Rose 2.0% and 5.9% Respectively

The broad AI theme rally was boosted by positive earnings announcements from NVIDIA (NVDA) and Broadcom (AVGO), as well as comments from TSMC, all indicating strong AI demand.

1. Future Outlook?

The past two weeks of semiconductor company earnings should support the floor for a short-term AI theme rally. The Nasdaq 100 index is currently 1.9% below its previous DeepSeek highs, and as macroeconomic indicators remain robust, we expect Megacap Tech and the Nasdaq 100 to reach new All-Time Highs (ATH) again. This week, NVIDIA CEO Jensen Huang has two keynote speeches (June 9th, June 11th) where he could potentially announce unexpected positive news. A re-escalation of trade wars (including semiconductor bans/sanctions) could dampen this optimistic outlook, but it's important to note that NVIDIA's $45 billion revenue guidance already includes an estimated $8 billion loss in China revenue due to existing sanctions. Another consideration is positioning, where we've seen increased buying from Hedge Funds (HF) as retail investor interest wanes.

2. Insights into AI Demand (Josh Meyers; Post-Broadcom Earnings)

– Persistent AI growth stands out (investors were initially skeptical when Harlan mentioned $5.1 billion in AI revenue for the July quarter). Our team projects +60% YoY AI growth for the fiscal year, implying over $6.0 billion in AI revenue for Q4 and $19.5 billion for the full year, surpassing the consensus of $18.5 billion. Even more exciting is that CEO Hock Tan endorsed Harlan's projection that this figure would grow another 60% in fiscal year 2026 to over $31.0 billion (vs. consensus of $25.6 billion). This will be supported by TPU V6 3nm, TPU V7 3nm, Meta 3nm and other projects, and Tomahawk 6. The networking segment's share of AI revenue is expected to normalize going forward. Cloud/hyperscaler capital expenditure (capex) remains strong, driven by anticipated AI training workloads and unexpected AI inference workload demand.

TSMC CEO Comment (Reuters) – "US tariffs are having some impact on the company and have been discussed with Washington, but Artificial Intelligence (AI) demand remains strong and continues to outstrip supply."


The past two weeks of semiconductor company earnings should support the floor for a short-term AI theme rally


Our team projects +60% YoY AI growth for the fiscal year, implying over $6.0 billion in AI revenue for Q4 and $19.5 billion for the full year, surpassing the consensus of $18.5 billion


Summary: Shares Morgan Stanley bullish thesis: Google Cloud undervalued at 18x 2026 PE, OpenAI partnership accelerates growth and signals confidence in search dominance.

industry='Internet Content & Information'

Google Cloud and OpenAI's Collaboration, Morgan Stanley: "This holds a very important meaning for Google investors"

According to previous reports from foreign media such as The Wall Street Journal (WSJ), OpenAI signed a partnership agreement with Google last month to receive the necessary computing power for model training and operation from Google Cloud, it was reported. Until then, OpenAI could not collaborate with other cloud services due to its exclusive contract with Microsoft, and until before January of this year, Microsoft was OpenAI's sole cloud service provider.

According to the latest report published by Morgan Stanley analyst Brian Nowak and his team, the partnership agreement between Google Cloud and OpenAI holds very significant meaning in the following two aspects:

1. Expectation of accelerating the growth of the Google Cloud business: It can promote the growth of the Google Cloud business, which is not being fully valued at its current level of an estimated 2026 Price-to-Earnings Ratio (PER) of about 18x.

2. A demonstration of Google's confidence: It sends an important signal to the market that Google has strong confidence in its long-term position in the search market.
The report speculated that while it is not confirmed whether OpenAI will use Google's TPUs or GPUs, it is more likely that they will rely on Google's GPUs to meet their computing capacity demands. Through this, OpenAI can maintain consistency across its entire infrastructure, avoid 'vendor lock-in' where it becomes dependent on a specific provider, and avoid the hassle of engineers having to familiarize themselves with a new chip architecture.

Google Cloud, Welcoming a New Growth Engine?

The report pointed out that this collaboration could be an important turning point for the Google Cloud business.

Currently, Google Cloud's annualized revenue is approaching nearly $50 billion, and it has maintained a growth rate of 20% to 30% over the past two years. However, compared to Amazon's AWS or Microsoft's Azure, it has not shown a sustained dominant position in terms of market share and growth. If a significant-sized OpenAI joins the fold, it could become a catalyst to accelerate Google Cloud's growth.

The report analyzed that Google's current estimated 2026 PER of about 18x, corresponding to its current stock price, means the market has not yet assigned a proper value premium to Google Cloud.

It also added that as Google's chip production capacity constraints ease in the second half of the year, this could become a driving force for faster and more sustained growth for Google Cloud. This is a potential positive factor for investors that has not yet been fully priced in.

Although the specific terms and scale of this collaboration have not been disclosed, analysts expect that as the inference stage of generative AI continues to develop, OpenAI will require increasingly more computing capacity. For reference, early this year, OpenAI signed a $11.9 billion deal with CoreWeave (including a $350 million equity investment), and recently extended this deal by an additional $4 billion.

Google, Strong Confidence in its Search Position

The deeper meaning of this collaboration is that it reflects internal confidence in the long-term competitiveness of Google's core search business.

For a long time, investors have been concerned about whether products like OpenAI's ChatGPT would dismantle Google Search's dominant position.

The report sharply pointed out, "If Google were truly concerned about its search business being threatened, would it willingly provide key computing power to a potential competitor?" and analyzed that the answer would be 'no.' This suggests that Google knows the data on the health of its business better than any outsider, and has strong confidence in its user base, data assets, and pace of innovation.

The report added that Meta's AI products could pose a greater structural threat to Google's search business than OpenAI, but Meta AI still has the challenge of proving its commercialization capabilities.

$GOOG


the era of having 'Nvidia as the only choice' is ending. A diversified, open, and distinctly Chinese computing ecosystem is taking shape.

Summary: Bearish NVDA: China's de-Nvidia-ization is becoming engineering reality, shrinking its Chinese market share and eroding its once-unassailable position.

Commentary: China's AI computing system ditches Nvidia—Jensen Huang faces new reality-Digitimes

Amid the escalating US-China tech war and supply chain risks, the trend of "de-Nvidia-ization" is rapidly spreading within China's computing power industry. This shift represents not only a technological transformation but also a comprehensive change encompassing policy, technology, ecosystem, and market dynamics.

The long march toward computing self-reliance involves domestic AI chip and solution companies such as Infinigence AI and Lisuan Tech joining forces to challenge Nvidia's dominant position in the Chinese market. Their goal is to establish a computing power system free from external sanctions.

Strategic shift becomes engineering reality
On May 28, 2024, the State Council Information Office of the People's Republic of China held a press conference that clearly signaled its commitment to advancing indigenous technological autonomy.

The attending companies were among China's top-tier representatives of cutting-edge strength. One startup founded by a Tsinghua University-affiliated team, AI computing newcomer Infinigence AI, became a focal point.

Through its Infini-AI heterogeneous hybrid training platform, it integrates multiple domestic and overseas chips, including Huawei Ascend, AMD, Iluvatar CoreX, Enflame, MetaX, and Moore Threads, breaking the longstanding dependence on Nvidia's CUDA ecosystem.

The Infini-AI platform supports heterogeneous hybrid training with computing capacity at the scale of thousands of GPUs, achieving a utilization rate of 97.6% and possessing scalability potential up to tens of thousands of GPUs. This indicates that China is not only seeking breakthroughs in chips but also realizing cross-platform integration at the AI training platform level, providing alternative solutions for local large models.

According to available data, no fewer than 100 computing clusters in China have shifted to heterogeneous system architectures, meaning that "de-Nvidia-ization" has moved from an option to an engineering practice. Large model enterprises such as Zhipu AI, Moonshot AI, and ShengShu are already operating on the Infini-AI platform. The clear message behind this is that China is establishing a new foundational order for homegrown AI.

Domestic GPU breakthrough emerges
Meanwhile, China's domestic GPUs are beginning to make substantial progress.

Founded in 2021, Lisuan Tech recently announced the official testing launch of its first self-developed architecture GPU, the "G100," after three years of research and development. It positions itself as China's first high-end GPU manufactured using a 6nm process. The G100 reportedly targets performance comparable to Nvidia's RTX 4060 series, supporting mainstream graphics APIs while featuring high computing power, large memory capacity, and low power consumption. It can be applied across diverse scenarios such as gaming, industrial design, and smart vehicles.

Reports suggest that the G100 has secured orders exceeding CNY100 million and attracted partnership talks with several major end manufacturers. In a GPU field long dominated by Nvidia and AMD, these domestic breakthroughs carry strategic significance in filling China's high-end GPU gap. More importantly, the G100 claims to adopt a fully independent IP architecture, free from constraints imposed by CUDA or US-based ecosystems.

Driven by geopolitical pressures and export controls, China's push for autonomous control over computing infrastructure is intensifying rapidly. According to SEMI and IDC data, global AI training computing demand will double in 2025. As the world's second-largest market, China's move to build its own computing power is inevitable.

Industrial transformation beyond chip replacement
Although Nvidia still holds a 50% market share in China, generating revenue of US$17.1 billion in fiscal year 2025—the second largest after the US domestic market—it has faced challenges since the US Department of Commerce imposed export controls on H20 chips. Nvidia reported inventory losses exceeding US$5.5 billion and adjusted its China strategy by planning to release updated, heavily restricted GPUs at significantly reduced prices.

This approach carries risks. The downgraded GPUs reportedly omit high-bandwidth memory (HBM) used for advanced AI computations and do not employ TSMC's CoWoS packaging technology, lowering technical thresholds. Consequently, their appeal to Chinese customers diminishes, as they increasingly view Nvidia products as optional rather than essential, shaking Nvidia's once unassailable position.

Nvidia CEO Jensen Huang has stated that US restrictions on technology exports to China were a "failure," inadvertently accelerating China's research and development and innovation pace. China is moving toward open-source models and platforms, while hardware and middleware are following paths of independence. Once this decentralized, de-Nvidia-ized process matures, China's AI industry will possess counterattack capabilities.

"De-Nvidia-ization" is not simply abandoning a brand or platform; it is a comprehensive reorganization spanning architecture, toolchains, and entire ecosystems. As one Chinese tech leader noted, supply chain choices are no longer straightforward. Although Nvidia chips offer high performance, they create heavy dependencies. Using Chinese chips may incur short-term switching costs but secure long-term independence.

This wave of technological autonomy is driving Chinese chipmakers to build complete ecosystems covering chip design, foundries, software platforms, and training models. Emerging forces like Infinigence AI and Lisuan Tech are constructing a fully independent, entirely "decoupled-from-US" AI supply system.

Future implications for regional competition
Currently, China's AI computing power stands at a turning point. With domestic chips filling gaps and heterogeneous hybrid training systems maturing, the era of having "Nvidia as the only choice" is ending. A diversified, open, and distinctly Chinese computing ecosystem is taking shape.

For Taiwan, observing China's de-Nvidia-ization process offers more than just insight into geopolitical rivalry; it presents an opportunity to rethink AI industry chain autonomy, supply chain resilience, and cross-platform collaboration potential. After all, in the future driven by computing power-enabled AI, whoever controls more flexible, secure, and scalable computing platforms will command the next wave of technological competition.
$NVDA

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https://t.co/UKtHIRo6nh


Summary: Shares/endorses UBS Buy on Micron with $155 SOTP target (5x HBM, 3x Core DRAM+NAND) on structural HBM-driven profitability transformation.

Micron: Structural Bull Thesis Starting To Finally Play Out

📌 UBS Report Key Summary (June 26, 2025)

🧠 Investment Core Logic: Realization of Structural Bull Thesis

- HBM  is driving a structural transformation of the DRAM business, leading to improved profitability and stability.

- HBM accounts for ~6-7% of overall DRAM bits, and ~19-20% based on DRAM production capacity.

- Limited DRAM production capacity is preferentially allocated to high-margin product lines (HBM), maximizing profitability.

- HBM revenue and profit allow for application of high multiples, changing the valuation framework.

- For FY26~27, 5x P/S is applied to HBM, and 3x P/S to Core DRAM+NAND.

- Accordingly, a target price of $155 is presented based on the SOTP (Sum-of-the-Parts) method.

📊 FY25 Q3 Earnings Summary (May Quarter 2025)
- Revenue: $9.30B. This exceeded the consensus of $8.86B and UBS's estimate of $9.25B, going above the upper end of guidance.
- Non-GAAP EPS: $1.91. This surpassed the consensus of $1.60 and UBS's estimate of $1.78, also exceeding the upper end of guidance.
- Gross Margin: 39.0%. This was higher than the consensus of 36.7% and UBS's estimate of 38.0%, influenced by cost improvements.
- FCF (Free Cash Flow): $1.95B. This was better than the consensus of $1.72B and UBS's estimate of $1.64B, due to the effect of reduced CapEx.

HBM revenue is estimated to grow +50% YoY, with half of the DRAM revenue increase attributable to HBM.
The mass production yield of HBM3E 12-Hi products is superior to last year's 8-Hi, positively impacting the cost structure.

🔮 FY25 Q4 Guidance (August Quarter 2025)
- Revenue: Guidance is $10.7B ± $300M. This significantly surpasses the consensus of $9.89B and UBS's estimate of $10.74B, indicating robust AI/data center demand.
- EPS: Guidance is $2.50 ± $0.15. This substantially exceeds the consensus of $2.01 and UBS's estimate of $2.50.
- Gross Margin: Guidance is 42% ± 1%. This is higher than the consensus of 39.9% and UBS's estimate of 42.3%, due to a stronger mix of high-value products.

🧩 Product-Specific Insights
HBM

- FY25 Q3 revenue estimated at approximately $1.68B, with Q/Q growth of ~+50%.
- FY25 Q4 estimated revenue around $2.3B, with Q/Q growth projected at over +40%.
- Gross Margin: Estimated to be mid-50% or higher.

Core DRAM

- ASP Q/Q -4% (due to increased proportion of consumer products).
- DRAM bit shipment growth for full FY25 upgraded to high-teens %.

NAND
- FY25 Q3: Bit +24% Q/Q, ASP -6.5% Q/Q.
- NAND bit growth for full FY25 maintained at +20%.

🔩 Industry/Demand Outlook
- AI data center demand is driving the market: CNBU (Compute & Networking Business Unit) accounts for 55% of total revenue.

- PC·Mobile: Demand recovery is slow, with slight improvements in mobile DRAM/NAND.

- Industrial/Automotive Memory: Signs of demand recovery are beginning.

📈 Valuation Details

- HBM: For HBM, the applied Revenue (C26E+C27E average) is $16.6B, with a 5x P/S multiple, resulting in a per-share value of $68.
- Core DRAM+NAND: For Core DRAM+NAND, the applied Revenue (C26E+C27E average) is $36.6B, with a 3x P/S multiple, resulting in a per-share value of $87.
- Total: The total combined per-share value is $155.

📉 Upside/Downside Scenarios

- Upside Scenario: Target price of $195. Key assumptions include HBM ASP +16%, and DRAM/NAND bit growth of +20% or more.
- Base Scenario: Target price of $155. Key assumptions maintain current estimates (HBM 5x, DRAM/NAND 3x P/S).
- Downside Scenario: Target price of $95. Key assumptions include HBM ASP -14%, DRAM ASP -16%, and slowing NAND growth.

🔎 Other Noteworthy Points
- FY25 CapEx is maintained at $14B, with greenfield capacity increasing from Q4.
- Share buybacks are limited due to CHIPS Act restrictions.
- UBS considers the upcoming separate disclosure of HBM quarterly margins (expected) as a strong momentum factor.


Summary: Bullish on Lens Technology as Apple's foldable hinge/UTG turnkey supplier; H-shares seen as having significant upside potential on HK listing.

Lens Technology 300433.SZ China Shenzhen glass covers

What is the Significance of Lens Technology's Hong Kong Listing?

Written by: Jukan C

The Alpha and Omega of Apple's Foldable SCM

It is an open secret within the industry that Lens Technology is virtually confirmed to become the largest supplier, or at the very least the first vendor, for the internal hinges of Apple's foldable products.

Apple is reportedly highly concerned that using Samsung's foldable supply chain could lead to the transfer of foldable-related know-how and technology to Samsung. Consequently, it is understood that Apple prefers Lens Technology, which has no prior business dealings with Samsung.

Lens Technology is also said to be responding favorably to Apple by most actively pursuing capacity (CAPA) expansion.

This Hong Kong IPO can also be interpreted as a move to raise funds for increasing CAPA.

Furthermore, it can be seen as a strategic decision to facilitate easier investment for foreign investors looking to participate in the Apple value chain.

According to recent supply chain sources, China's Lens Technology has reportedly proposed a turnkey solution to Apple. This proposal includes supplying the protective film for the top of the UTG (Ultra-Thin Glass) and handling the BM (Black Matrix) printing process.

BM is the process of applying a black masking to the edges of the protective film. It serves to visually conceal the module components behind the OLED screen. For foldable OLED protective films, the durability of the BM is critical, as it must not detach despite repeated bending.

Previously, Apple held Sekyung Hi-tech's BM printing technology in the highest regard. Sekyung Hi-tech has an exclusive supply agreement with Japan's Alps Alpine for BM thermal transfer equipment. Because of this, the industry anticipated that Sekyung Hi-tech would easily join Apple's foldable SCM, despite being a partner of Samsung Electronics.

However, a Chinese component industry expert explained, “Lens Technology made a turnkey proposal to Apple using a non-thermal transfer method for BM printing.” He added, “They offered a significantly lower unit price in exchange for securing the entire volume for both UTG and protective films, which has essentially swayed Apple’s decision-makers.”

Personally, I judge that Lens Technology has significant potential. It is particularly attractive in that the possibility of its H-shares trading at a premium to its A-shares upon listing cannot be ruled out.

This is not a recommendation to buy or sell.

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https://t.co/PGKuXUbu5I


Summary: MS supply chain note: NVDA CoWoS-L demand intact at 390K vs rumored cuts; TSMC wafer output ~5.1M; AMD named Humain partner; MediaTek WoA PC chip unlikely to launch near term.

Key Points on the AI Supply Chain: Large-Scale Middle Eastern AI Project, CoWoS-L Capacity Forecast, and Developments in China and Taiwan
Morgan Stanley (C. Chan, 2025/05/16)
(1) Launch of the Middle East Humain AI Project – 500MW Compute Deployment
Saudi Arabia has announced government-backed support for the establishment of the AI company "Humain," with a plan to invest $10 billion over the next five years to deploy 500 megawatts of AI computing power. The project will be primarily led by SMI as the ODM and executed in two phases. The first phase will involve the deployment of 18,000 NVIDIA GB300 Grace Blackwell supercomputing nodes, equipped with InfiniBand networks. Channel checks reveal that the nodes will come in both NVL72 and HGX configurations, with deployment expected to continue until Q1 2026. AMD’s GB300 has also been listed as a strategic partner.
(2) 2025 CoWoS-L Packaging Forecast Maintained at 390K Units
Despite market rumors suggesting a possible reduction in Blackwell packaging volume to 340–350K units, Morgan Stanley's supply chain checks indicate otherwise. It is projected that NVIDIA will consume 160K CoWoS-L substrates in H1 2025, and over 100K more in Q3. Approximately 94% of packaging volume is dedicated to the dual-die B200/B300 series, translating into an estimated annual wafer output of about 5.1 million units at TSMC. The Greater China downstream team expects 6,000–9,000 GB200 NVL72 units to be shipped in H1 2025, consuming roughly 500 B200 chips. Additionally, 45,000–50,000 HGX systems (8 GPUs per unit) are projected to be shipped, consuming another ~400 chips. With rack integration improving and capacity utilization increasing, further inventory digestion is expected in Q3 2025. The key uncertainty remains whether rack-level integration and assembly can accelerate in parallel.

(3) China AI GPU Sanctions and Inventory Preparation Trends
On May 13, the U.S. Department of Commerce issued new regulations, signaling growing demand for the B30 chip designed for inference applications in China. Morgan Stanley estimates a small volume of wafers may be produced in Q2 2025, rising to as many as 500,000 chips by Q3. Due to the H20/HBM version ban and Amkor’s cancellation of approximately 30,000 CoWoS-S packaging orders, inventories are expected to shift toward the H200 model, and the surplus will need to be redistributed within alternative supply chains.
(4) Preview of Taipei Computex
Next week’s Taipei Computex will unveil several new AI hardware products. However, Morgan Stanley believes the “WoA AI PC” chip jointly developed by NVIDIA and MediaTek still lacks sufficient software ecosystem support and is unlikely to make a formal debut in the near term. The event will mainly focus on integration of technologies across the AI server and PC ecosystems and the practical applications of these technologies.

(5) Steady Demand, Rack Integration as a Core Bottleneck
Overall, demand for AI servers remains robust—from large-scale orders in the Middle East to ongoing global rack deployment, compute power applications continue to expand. The real bottleneck in the supply chain is no longer chip production capacity but the complexity of hardware-software integration and system testing timelines. Key areas of focus going forward will be whether rack assembly can scale as scheduled and the pace of inventory digestion across various supply chain stages.


Approximately 94% of packaging volume is dedicated to the dual-die B200/B300 series, translating into an estimated annual wafer output of about 5.1 million units at TSMC


AMD's GB300 has also been listed as a strategic partner


Morgan Stanley believes the 'WoA AI PC' chip jointly developed by NVIDIA and MediaTek still lacks sufficient software ecosystem support and is unlikely to make a formal debut in the near term


Revenue guidance could approach JP Morgan's $16.1 billion estimate, above consensus... AI Business Expected to Grow 60% in FY2025... FCF expected to grow at double-digit rates over the coming years

Summary: Shares JP Morgan Buy-equivalent preview on AVGO: Q2 in-line/beat, July guide above consensus, 60% AI revenue growth FY2025, double-digit FCF growth.

Broadcom: Q2 Earnings Preview – Continued Strong ASIC Growth Expected
JP Morgan (H. Sur, June 3, 2025)

Broadcom is scheduled to report its F2Q25 earnings this Thursday, and revenue, earnings, and free cash flow (FCF) are expected to be in line with or slightly above market expectations.
AI-related products (custom ASICs and networking) continue to show strong growth, with April quarter AI revenue potentially exceeding $5 billion, driving July quarter guidance to increase 5–7% QoQ, close to JP Morgan’s forecast of $16.1 billion.
Google’s 3nm TPU v6 ASIC has entered mass production, with a lifecycle revenue estimate exceeding $15 billion.
On the AI networking side, demand remains strong for Tomahawk 5 and Jericho 3 AI, and the next-gen Tomahawk 6 is set to begin mass production in the second half of the year.
Full-year AI revenue for FY2025 is projected at $19–20 billion, representing 60% YoY growth.
Meanwhile, non-AI semiconductor businesses are recovering with the broader industry cycle, and wireless has upside potential.
VMware software renewals remain strong, with customers shifting toward VCF full-stack premium products, continuing to unlock synergy benefits.

⸻

• April Quarter Results Expected In Line or Slightly Better:
• Strong demand for AI networking and custom ASICs
• Non-AI segments (telecom, servers, broadband) are stabilizing
• Healthy VMware renewal momentum supporting overall order strength

⸻

• July Quarter Guidance Likely In Line or Above Expectations:
• Continued growth in AI business
• 3nm TPU ASIC project entering production ramp
• Revenue guidance could approach JP Morgan’s $16.1 billion estimate, above consensus
• Gradual improvement in non-AI segments expected

⸻

• AI Business Expected to Grow 60% in FY2025:
• Projected revenue: $19–20 billion
• Key drivers:
• Google TPU v6
• Meta and ByteDance custom ASIC programs
• Strong demand for AI networking products
• TPU v6 alone could generate over $15 billion in lifecycle revenue

⸻

• Strong Free Cash Flow Growth & Enhanced Capital Returns:
• FCF expected to grow at double-digit rates over the coming years
• Supporting dividend increases and deleveraging
• Enhancing overall profitability


Summary: Morgan Stanley sees QCOM's Alphawave deal bolstering chiplet/IP capabilities and opening data center/AI inference revenue, with Amazon Trainium2 and Microsoft Maia as key 2026 catalysts.

Qualcomm: Bolstering IP and Chiplet Design, Betting on Data Center and AI Inference Markets
Morgan Stanley (L. Simpson, June 10, 2025)

Qualcomm's acquisition of Alphawave for $2.4 billion aims to complement its I/O and SerDes IP and penetrate the advanced chiplet ecosystem, thereby assisting its expansion from core smartphone business into the data center and AI inference domains. The interconnect IP gained from Alphawave, coupled with the logic block capabilities acquired from OpenFive previously, is expected to reduce Qualcomm's reliance on Arm licenses in the future and accelerate chiplet design and integration. Alphawave's chiplet interconnect solution can meet the high-bandwidth requirements of backplane and fly-over interconnects for high-density AI racks. This capability, the firm believes, is crucial for data center and AI hardware iteration. Qualcomm is deeply collaborating with the Arm ecosystem through its HUMAIN project, utilizing new IP resources to gain an early advantage in the low-power, inference acceleration market, but it still faces fierce competition from NVIDIA, AMD, and cloud vendors' in-house designed chips. The firm believes that if Qualcomm can materialize its follow-up cooperation with Amazon's Annapurna team on Trainium 2 in 2026 and drive projects like Microsoft Maia to fruition, it will significantly boost its data center revenue. Considering the high barriers in the x86 market and past experience with Centriq, Qualcomm's entry into the data center CPU/NPU domain still requires "performance validation," and the market will closely monitor its product roadmap, approval progress, and initial mass production developments.

$QCOM


Summary: Shares Goldman Buy on SK Hynix (PT KRW 290K) on HBM leadership + AI memory; Samsung also flagged as beneficiary of new government's pro-semiconductor policies.

Goldman Sachs) SK Hynix Buy, Target Price KRW 290,000: South Korea Semiconductor Industry Policy and SK Hynix Investment Analysis

Historically, the Korean government's semiconductor policies have focused on 1) building mega semiconductor manufacturing hubs, 2) tax credits for domestic facility investments, and 3) R&D support. However, the impact of government policies on large companies like Samsung Electronics (SEC) and SK Hynix has often been limited for the following reasons: 1) Construction projects typically span long periods (e.g., 10 or 20-year plans), which has limited impact on the short- to medium-term capital expenditure (capex) plans of both SEC and Hynix. 2) Project durations typically exceed the presidential term of four years, which cannot guarantee the continuity of project execution. 3) In the past, neither SEC nor Hynix has significantly increased their capex plans due to tax credits; rather, changes in capex plans have been driven by changes in industry supply and demand conditions and outlook.

The new President-elect Lee Jae-myung's key semiconductor policy agenda includes: 1) swift enactment of the pending Semiconductor Special Act, 2) 10% tax credit for domestic chip production/sales, 3) acceleration of the Yongin Semiconductor Manufacturing Hub project timeline, 4) expanded support for semiconductor R&D, and 5) establishment of national AI data centers. While it remains to be seen whether the proposed policies will be implemented as planned, if realized, both SEC and Hynix could potentially benefit from higher tax credits. Furthermore, given that the new President-elect has pledged to prioritize support for the semiconductor industry and that his first action after being confirmed as a presidential candidate on April 28 was to visit SK Hynix's Icheon campus, we believe the new government's pro-semiconductor stance could provide positive investment sentiment for stocks we cover, such as SEC and SK Hynix.

We view SK Hynix as a strong beneficiary of artificial intelligence (AI) based on its solid High Bandwidth Memory (HBM) market leadership, and we continue to highlight it as our top pick within our Korean technology coverage. With a robust HBM outlook maintained, the company's earnings stability, stemming from its AI memory leadership, has significantly improved compared to past cycles, with HBM expected to account for nearly half of its DRAM revenue and 60% of its DRAM profit this year. Considering our expectation for its Return on Equity (ROE) to exceed 30% this year and the current stock trading near its historical average valuation multiple, we believe the risk-reward is attractive, and we maintain our Buy rating on SK Hynix with a 12-month target price of KRW 290,000.

Investment Overview - SK Hynix

SK Hynix is the world's second-largest DRAM supplier and one of the leading NAND suppliers. We believe the company's earnings stability, stemming from its AI memory leadership, has significantly improved compared to past cycles. However, given its still unburdensome valuation level, we assess that this point is not yet fully appreciated, leading us to assign a Buy rating to the stock. Key risks include a significant deterioration in memory supply and demand and delays in technology transitions.

Target Price Risks & Methodology - SK Hynix

Valuation Methodology: Our 12-month target price of KRW 290,000 is derived by applying a target Price-to-Book (P/B) ratio of 2.0x to the average of our estimated 2025 Book Value Per Share (BVPS).

Key Risks: 1) Significant deterioration in memory supply and demand, and 2) delays in technology transitions.


the new government's pro-semiconductor stance could provide positive investment sentiment for stocks we cover, such as SEC and SK Hynix


Summary: AMD flagged as a beneficiary of inference demand given Microsoft chip delays and OpenAI's GPU leasing activity.

Here are my takeaways after reading this report:

1. The migration of MediaTek's SerDes personnel to Nvidia significantly impacted TPU delays (as far as I know, at least half, if not the majority, of the SerDes personnel transferred to Nvidia).

2. The Microsoft-OpenAI collaboration might be stronger than expected?The report mentions that OpenAI is providing significant feedback on Microsoft's custom chip.This suggests that, for now, the collaboration between Microsoft and OAI isn't at a concerning level. (Of course, this report deals with past information, and it's possible that OAI has already decided to part ways with Microsoft.)

3. In the comments section, BK Tech Insights pointed to AMD as a beneficiary for inference. I've reconsidered this, and given that OAI reportedly leased Google TPUs, I think AMD could also sufficiently benefit from inference.

[Microsoft's AI Chip Development Status and Problems] - BK Tech insight

📌 Executive Summary

- Microsoft's self-developed AI chip performance and schedule, aimed at reducing Nvidia dependence, are significantly delayed more than expected.
- The latest AI chip (Braga) launch is


Summary: Citi relays top picks ADI and TXN as most defensive; Buy on AVGO, MCHP, MU, NXPI; maintains 8% YoY 2025 semi revenue growth outlook.

Citi – U.S. Semiconductors: April Revenue in Line with Our Forecast, but Below Seasonal Average; Maintain 8% YoY Growth Outlook for 2025, Top Picks Are ADI and TXN

On Thursday (local time), the Semiconductor Industry Association (SIA) reported that U.S. semiconductor industry revenue for April was $55.0 billion, down 11.1% MoM. While this decline is larger than the typical seasonal average of -10.0%, it is exactly in line with our forecast of $55.0 billion (-11.1% MoM), reflecting weakness in microprocessor and DRAM sales.

We expect further moderation in the second half of 2025 due to tariff-related adjustments, resulting in monthly sales figures continuing to fall below seasonal norms. Nonetheless, we maintain our full-year 2025 semiconductor revenue growth forecast of +8% YoY.

Our top picks remain Analog Devices (ADI) and Texas Instruments (TXN), which we view as the most defensive names during economic downturns. Other Buy-rated names include Broadcom (AVGO), Microchip Technology (MCHP), Micron Technology (MU), and NXP Semiconductors (NXPI).


Other Buy-rated names include Broadcom (AVGO)


Other Buy-rated names include Broadcom (AVGO), Microchip Technology (MCHP)


Summary: Samsung seen as biggest DDR4 price-surge beneficiary in Q2, with volume/price/margins all positive; partially offsets HBM weakness.

Report: Samsung Benefits from Surprise DDR4 Demand... A 'Welcome Rain in a Drought' for Q2 Earnings

According to reports from Korean media, Samsung Electronics is expected to deplete its DDR4 and LPDDR4 inventory in the middle of this year by a much larger margin than originally anticipated.

DDR4 and LPDDR4 are considered legacy (mature) products in the DRAM industry. Major DRAM manufacturers are focusing on producing DDR5 and LPDDR5X and have decided to significantly reduce their DDR4 and LPDDR4 production by the end of this year. In Samsung's case, the revenue share of DDR4 and LPDDR4 in its total DRAM sales reached the 30% range last year. The plan is to reduce this to a single-digit percentage this year.

In contrast, customers are reportedly moving actively to secure inventory in advance to counter the production cuts of DDR4 and LPDDR4. Consequently, the prices for DDR4 and LPDDR4 are showing a sharp short-term increase.

According to market research firm TrendForce, the price increase for PC DDR4 modules in the second quarter of this year is projected to be 13-18% quarter-over-quarter, far exceeding the initial forecast of 3-8%. The forecast for the third quarter has also been revised upward from 3-8% to 8-13%.

This trend is a positive factor for Samsung Electronics' memory business in the second quarter. Although legacy DRAM is a non-core business, the surge in demand allows Samsung to quickly clear out its existing inventory.

A semiconductor industry official explained, "DDR4 and LPDDR4 products have reached a point where they 'can't be sold because there's no stock,' and the price premium over DDR5 has narrowed to an abnormal level. In particular, Samsung is known to have proposed price hikes to its mobile and consumer electronics clients that are above the industry average."

Another official commented, "In the first quarter, DDR4 shipments decreased slightly due to the off-season, but they are expected to rebound in the second quarter, leading to a meaningful expansion in revenue. There's a possibility that the Q2 DRAM bit growth (supply growth rate) could exceed the low 10% range that Samsung initially guided."

Thanks to this, Samsung is expected to be able to partially offset the impact of its sluggish HBM business in the second quarter. Previously, it was estimated that Samsung supplied around 600-800 million Gb (Gigabits) of HBM in the first quarter, a significant decrease from the previous quarter (estimated at 2 billion Gb). A similar supply volume is anticipated for the second quarter.

Kim Un-ho, a researcher at IBK Investment & Securities, stated, "DDR4 prices rose most sharply during the second quarter, and Samsung is expected to be the biggest beneficiary, making volume, price, and profit margins all positive variables. On the other hand, HBM volume is significantly weaker than previous forecasts, so reflecting this, the memory division's second-quarter operating profit will not be significantly different from the previous forecast."

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https://t.co/1rMl7xqEAK


He assessed that TSMC's continuous price increases could become the new 'normal' in the future, which is a potential positive for TSMC.

Summary: Bullish TSMC: multiple banks see sustained price hikes (3-10%), 2nm ramp, and structural pricing power as durable positives.

Global investment banks' views on TSMC:

- TSMC's 3nm and 4nm process lines are operating at full capacity, leading to overall May revenue exceeding expectations.

- According to the latest research from Morgan Stanley semiconductor analyst Jame Wu (詹家鴻), U.S. customers are prepared to accept higher prices to secure 4nm process capacity at TSMC's U.S. factory.

- Consequently, Taiwanese media reported that TSMC is exploring the possibility of raising foundry prices at its U.S. factory by at least 10%.

- KGI Securities expects TSMC's 2nm process to begin production in the fourth quarter of this year and contribute significantly to revenue starting next year.

- TSMC's 2nm monthly production capacity is projected to expand from 25,000 wafers by the end of this year to 70,000-75,000 wafers by the end of next year.

- Goldman Sachs anticipates that TSMC will increase prices for processes below 5nm by approximately 3% and CoWoS prices by 5% in 2025.

- This is interpreted as a measure to reflect rising costs, such as investments in the U.S. factory and electricity rate hikes in Taiwan.

- Gokul Hariharan, Head of Taiwan Research at J.P. Morgan, pointed out that while most investors currently view TSMC's price increases as a one-off event, they overlook that TSMC has already established a continuous price adjustment system for several years, which has been a win-win strategy for both customers and TSMC.

- He assessed that TSMC's continuous price increases could become the new "normal" in the future, which is a potential positive for TSMC.

$TSM

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https://t.co/7QhNkEV26N


Summary: Morgan Stanley prefers ADI and NXPI on conservative inventory guidance; positive on memory leaders; cautious on cyclicals, favors AI growth names.

Semiconductor Inventory Tracker: Overall Above 10-Year Median, De-stocking Momentum Slowing but Structural High Inventory May Persist
Morgan Stanley (J. Moore, 25/06/09)

Although inventory levels across segments remain above historical medians and saw a slight increase in Q1, the inventory destocking cycle has passed its inflection point. Subsequent tariff uncertainties may lead supply chains to maintain structurally elevated inventory levels.

• Supply Chain Overview: Aggregate Days of Inventory (DOI) Rise Below Seasonal Norm
In Q1, total inventory days across manufacturers, distributors, and customers rose by 12 days quarter-over-quarter (QoQ), below the typical seasonal increase of 19 days. Distributor DOI rose for the second consecutive quarter, and customer inventory saw the largest increase, primarily due to the fastest decline in customer Cost of Goods Sold (COGS), coupled with incomplete digestion of incremental inventory. Overall, supply chain destocking momentum weakened, with inventory levels still significantly above the 10-year median.

• Manufacturers and Segment Analysis: Divergent Inventory Contributions from Memory and Compute
Manufacturers’ DOI remained flat QoQ, below trend expectations. Within segments, DOI in the computing sector dropped by 15.5% QoQ, primarily driven by shipment recovery after the alleviation of NVIDIA Blackwell supply constraints. Memory segment DOI surged by 24.9%, reflecting both seasonal effects and substantial DRAM production increases to meet computing demand. Analog and MCU segments saw only a slight 2.7% rise, indicating a slow and moderate recovery phase.

• Distributor Dynamics: Divergent Inventory and Shipment Trends
Overall distributor DOI increased by 3 days, aligning with the seasonal expectation of 4 days, and currently stands 21 days above the historical median. Arrow and Avnet experienced DOI increases of 6–7 days due to a 7% drop in COGS, whereas WPG’s DOI fell by 2 days due to a 6% rise in COGS. Channel checks indicated that distributors highlighted volume growth in their Q1 results, though overall data still depict a state of “stalled destocking.”

• End-Customers: Inventory Replenishment and Segment Differences
End-customer DOI increased by 9 days QoQ, aligning with seasonal expectations. Manufacturers and consumer market sectors saw the largest increases, primarily due to sharp declines in COGS (48.6% and 40.6%, respectively). Conversely, storage (-43.1%), automotive supply chains (-7.2%), computing/mobile (-4.3%), and consumer sectors (-2.9%) experienced inventory reductions. The industry overall has passed inventory troughs, but macroeconomic factors and tariff-related noise may sustain elevated inventory levels longer than usual.

• Implications
Inventory’s short-term fundamental impact is neutral to slightly positive, as moderate replenishment supports demand. However, ongoing tariff uncertainty could increase corporate willingness to restock, suppressing normal inventory cycle fluctuations. Morgan Stanley prefers companies that have conservatively guided inventory-driven growth, such as ADI and NXPI, and remains positive on memory leaders benefiting from the need to maintain higher inventory levels. The firm maintains a cautious stance on cyclical sectors, favoring high-growth AI narratives instead.


remains positive on memory leaders benefiting from the need to maintain higher inventory levels

Memory sector basket: Micron, SK Hynix, Samsung


Summary: Morgan Stanley rates Foxconn, Wistron, and Quanta Outperform on GB200 rack shipment ramp; author relays and adopts the directional call.

Hon Hai Precision (Foxconn) 2317.TW Taiwan

• Morgan Stanley: Nvidia GB200 NVL72 server rack shipments in Q3 are expected to increase by more than 60% QoQ to 10,000-11,000 units. Among related Taiwanese companies, Foxconn (Hon Hai), Wistron, and Quanta were given an 'Outperform' rating.

• GB200 server rack shipments are estimated to have increased to approximately 2,000-2,500 units in May and approximately 2,500 units in June, with total Q2 shipments reaching approximately 6,000 units.

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https://t.co/Z03KRGEDww


Quanta in server/ODM context = Quanta Computer, TWSE 2382.TW


Summary: Shares UBS advanced packaging report: K&S and ASMPT benefit most if CoWoS shifts to Fluxless TCB; Besi positioned if flip-chip maintained; OSAT recovery could trigger equipment orders.

ASMPT listed on Hong Kong Exchange 0522.HK

Advanced Packaging: New Architectures Drive Supply Chain Restructuring, HBM and CoWoS Create Opportunities for Vendor Differentiation

UBS (M. Jenkins, 25/07/07)

During its inaugural global advanced packaging conference, UBS noted that as AI demand continues to drive packaging technology evolution, the supply chain structure is undergoing restructuring due to new design solutions. Key changes are centered around the WMCM architecture, divergences in HBM packaging pathways, and uncertainties regarding next-generation CoWoS processes.

WMCM to Reshape High-End Smartphone Packaging Architecture, Benefiting Multi-Die Heterogeneous Integration

Apple's plan to adopt WMCM (Wafer-Level Multi-Chip Module) has drawn significant attention across the supply chain. Compared to InFO, which only connects SoC and DRAM, WMCM supports the direct connection of multiple dies such as CPU/GPU/memory to a fan-out substrate without an organic substrate. Although flip-chip remains dominant in the short term, UBS expects a gradual shift towards Hybrid Bonding in the future, which is likely to spur demand for more chiplet architectures.

HBM Packaging Path Divergences Emerge, Thermal Bottlenecks May Accelerate Shift to Advanced Technologies

Samsung and Micron tend to adopt Fluxless TCB (Thermosonic Compression Bonding) and Hybrid Bonding to reduce thermal resistance and enhance integration, while SK Hynix may continue with its MR-MUF (Mass Reflow-Molded Underfill) process. UBS points out that 16Hi stacks are starting to encounter thermal bottlenecks, which are difficult to alleviate even with reflow materials. This will drive the penetration of higher yield, lower temperature/pressure packaging technologies. The base scenario predicts that HBM4E 16Hi will begin transitioning to Fluxless TCB, and 20Hi stages will see large-scale adoption of Hybrid Bonding.

High Uncertainty in CoWoS Evolution, Equipment Supplier Landscape May See a Reshuffle

Currently, the TSMC CoW (Chip-on-Wafer) portion is mainly supplied by Shibaura, while ASMPT and Besi are more advanced in WoS (Wafer-on-Substrate). If next-generation CoWoS adopts the Fluxless TCB process, K&S and ASMPT will benefit the most; the former's formic acid process offers high yield but lower capacity. If flip-chip solutions are maintained, Besi plans to launch its new-generation 8800 Chameo tool in 2026 to capture the CoW market, with placement accuracy reaching 1μm.

OSAT Capacity Utilization Recovers to 75%, Still Needs to Exceed 80% to Trigger New Equipment Orders

Most OSAT (Outsourced Semiconductor Assembly and Test) vendors have seen their utilization rates in traditional applications recover to approximately 75%. If this further increases to above 80%, it is expected to lead to a new round of equipment order growth, benefiting upstream equipment manufacturers.

Significant Divergence in Views Among Global Manufacturers, Supply Chain on the Eve of Transformation

Despite a general optimism for future growth driven by the AI trend, significant divergences still exist among manufacturers regarding key packaging roadmaps, technology selections, and equipment pathways. UBS believes this provides space for equipment vendors to diversify competition and make breakthroughs, with the industry potentially reaching a critical evolution inflection point within the next two to three years.


If flip-chip solutions are maintained, Besi plans to launch its new-generation 8800 Chameo tool in 2026 to capture the CoW market


we believe buy-side expectations for June quarter guidance may fall short of consensus by close to $7 billion… Margins are likely to be significantly impacted due to necessary write-downs

Summary: JPM preview flags NVDA June-quarter guidance ~$7B below consensus and gross margin risk from H20 export-ban write-downs; bearish into print.

JP Morgan NVDA Preview Summary

• Positioning Score (1 = fully short/underweight, 10 = fully long/overweight): 7

• Implied Move: 6.8% (as of May 23, 2025)

⸻

Market Sentiment:

As seen in our somewhat frustrating buy-side survey (already shared with participants), interpreting this quarter’s NVDA guidance is extremely challenging.

Assuming all else equal, we estimate that the export ban on H20 as of April 9 will remove approximately $15–16 billion from Nvidia’s FY revenue.
(Using AMD as a benchmark, this implies ~$7.6 billion impact for each of the June and September quarters.)

While most sell-side analysts haven’t fully reflected this issue in their forecasts, we had expected the buy-side to have priced it in to some extent.
However, based on actual survey results (with high participation), many investors still hadn’t accounted for this impact.

In fact, we believe buy-side expectations for June quarter guidance may fall short of consensus by close to $7 billion, yet the average shortfall from the survey came in at only $920 million.

⸻

Another Key Concern: April Quarter Margin Guidance

Margins are likely to be significantly impacted due to necessary write-downs.

• One-third of survey respondents expect F1Q gross margin (GM) to be around 58% (vs. current sell-side consensus of 71.1%).

• The remaining two-thirds of responses were concentrated in the 65–72% range.


EDA-related delays in China's capacity expansion—CXMT plans to ramp up to 300K wafers/month by 4Q25—could indirectly benefit global memory suppliers like SK Hynix

Summary: EDA export controls could delay CXMT yield ramp, sustaining tight DDR5 supply and indirectly benefiting SK Hynix.

"If EDA tools face similar restrictions as equipment exports, Chinese memory manufacturers could struggle to improve DDR5 yields.  For instance, ChangXin Memory Technologies (CXMT) is reportedly operating a 10Z4nm process comparable to global 1y/1znm nodes. However, intensified EDA controls could delay yield ramp-up in DDR5, sustaining a tight supply-demand environment for these products.  In the short term, DDR4 demand remains supported, while EDA-related delays in China’s capacity expansion—CXMT plans to ramp up to 300K wafers/month by 4Q25—could indirectly benefit global memory suppliers like SK Hynix."

EDA Export Controls: Short-Term Disruption to China’s Fabless Sector, Long-Term Catalyst for Localization and Onshore Substitution

JP Morgan (G. Hariharan, 2025/06/02)

The U.S. Bureau of Industry and Security (BIS) has imposed stricter licensing requirements on exports of EDA


Summary: Bearish AAPL: WWDC disappointed on AI, iPhone 17 likely to underperform, China share erosion, and de-rating pressure on entire Apple value chain expected to continue.

[Meritz Securities Electronics/IT Components Analyst Yang Seung-soo]

▶ Apple WWDC 2025 Review: An Empty Promise

Apple held its annual event, 'WWDC 2025,' on the 10th (KST), announcing content focused on OS reorganization rather than AI.

This is the first time in 12 years since 2013 that Apple has fundamentally redesigned the visual composition of its OS, and the "Liquid Glass" unveiled on this day, true to Apple's style, showed high design completeness.

However, at a time when new AI-related strategies needed to be revealed, we believe this announcement was a somewhat disappointing strategic judgment.

Of course, some AI-related features were disclosed, but they merely followed existing AI functionalities on the market rather than demonstrating differentiated innovation.

Compared to Google's annual developer event, 'I/O 2025,' last month, Apple's relative inferiority in both technical impact and direction became even more apparent.

Overall, this WWDC served to further highlight market concerns about Apple's lack of AI competitiveness, and we judge that Apple is highly likely to gradually fall behind compared to major competitors who are concentrating billions of dollars in AI investments in the mid to long term.

We also see a high possibility of the iPhone 17, scheduled to be released this year, failing to achieve success.

This is due to: 1) the rapid improvement in the hardware completeness of Chinese smartphone manufacturers, which is likely to lead to a continued structural decline in Apple's market share in China, and

2. the high possibility of expanded demand deferral based on consumer expectations, given that comprehensive changes across both software and hardware are anticipated from 2026, including full-scale Siri updates, foldable iPhones, and full-screen display adoption.

It is true that the prolonged sluggishness in Apple's stock price and its entire value chain since the beginning of the year has highlighted some valuation appeal.

However, at this point, where fundamental questions about Apple's AI competitiveness and uncertainties regarding demand recovery have not been resolved, we maintain our existing view that the pressure to de-rate the entire Apple value chain is likely to continue.

$AAPL


Arista maintains a leading share in the AI Ethernet front-end... some competitors' gains from short-term client deployments are not sustainable

Summary: Shares JPM note reiterating Arista's leadership in AI Ethernet; competitor gains seen as unsustainable, share stable or rising.

Arista: AI Ethernet Network Landscape Stabilizes, Market Share Remains Leading but Faces Short-Term Competitive Volatility
JPM (S. Chatterjee, 06/19/25)

The firm notes that despite market doubts about the competitive progress of Nvidia and Celestica, Arista maintains a leading share in the AI Ethernet front-end. The overall market structure is stable with some changes, and some competitors' gains from short-term client deployments are not sustainable.

- Arista Maintains Leadership in AI Ethernet Network Market, Forms Triad with Nvidia and Celestica

In the 2024 AI Ethernet network market, Arista held a 26% market share, Celestica 22%, and Nvidia 18%; Q1 2025 data shows this structure is largely stable. Cisco's market share is 5%. The firm points out that although Nvidia achieved strong quarterly revenue growth with Spectrum-X, its share growth mainly stemmed from the cannibalization of InfiniBand demand and concentrated short-term client purchases.

- AI Switching Market Shows Strong Growth, Arista's Share Stable or Slightly Increasing

The AI Switching (Ethernet + InfiniBand) market is expected to maintain a 35% CAGR until 2029, with growth rates potentially exceeding 60% in 2025 and 2026. Against this backdrop, Arista's total AI Switching share rose from 15% in 2023 to 18% in Q1 2025, outperforming market expectations.
Arista Leads in AI Front-End, Still in Early Stages of Client Adoption in Back-EndIn the AI front-end, Arista ranks first with a 38% share, while Celestica and Nvidia hold 16% and 13% respectively. In the AI back-end market, Celestica leads with a 28% share due to its deployment of 800G white-box switches at Amazon, Google, and Meta, whereas Arista's current back-end deployments at Tier 1 clients like Meta are still in early stages.

- Nvidia's Overall AI Switching Share Declines, Partly Due to InfiniBand Weakness

Despite Nvidia's strong performance in Ethernet products, its InfiniBand business has seen two consecutive quarters of year-over-year decline. Its overall AI Switching share dropped from 59% in 2023 to 46% in Q1 2025. The firm believes this indicates that Spectrum-X's growth partly comes from an internal migration from InfiniBand.

- Spectrum-X Revenue Structure is Complex, Short-Term Growth Potentially Driven by NICs and xAI Clients

Spectrum-X revenue is not purely switching revenue; it includes 55% Switching, 22% optical modules, 19% NICs, and 4% copper cabling. Recent growth is believed to stem from concentrated deployments by large client xAI, where a single client might contribute $400 million to $600 million in AI networking revenue, driving Nvidia's short-term revenue performance and creating competitive pressure for Arista.

$ANET


Summary: Shares JPMorgan's upgraded PT of KRW 71,000 on Samsung Electronics, noting stock trades at 30%+ discount to 10-year average P/B.

Samsung Electronics Preview

1. Goldman Sachs (GS)

1) Q2 2025 Operating Profit Outlook Downgraded (KRW 6.6 Trillion → KRW 5.5 Trillion)

- Primary reasons: Decrease in HBM shipments, expanded foundry losses, and foreign exchange losses due to stronger won.

- Strong volume and prices in general DRAM partially offset these factors.

2) HBM Related Issues

- Delay in HBM3E 12Hi certification by a major GPU customer → Shipment timing pushed back by more than one quarter.
- Q2 2025 HBM Revenue estimate: US1.1billion(downgraded from previous US1.6 billion).
- 2025 HBM Revenue estimate downgraded by 20% → Around US$8 billion for the year (+16% YoY).
- HBM3E and HBM4 supply expected to fully commence in 2026-27 → 2026 HBM shipments +63% YoY.

3) General DRAM and NAND Outlook

- DRAM price outlook upgraded: Expecting DDR5 spillover effect → ASP improvement in H2.
- Q2 2025 DRAM ASP: Slightly flat, recovery from Q3 2025.
- NAND similar pattern: Weak in Q2 2025, eSSD demand recovery leading from Q3 2025.

4) Foundry and System LSI
- Q2 2025 Operating Profit (OP): KRW -2.4 trillion (expanded loss from previous KRW -1.7 trillion).
- Consecutive 2 trillion won level losses for three quarters.
- Meaningful utilization rate recovery difficult without securing new customers.

5) Target Price: KRW 74,000 (unchanged)

2. JPMorgan (JPM)

1) HBM Business Progress but Technology Gap Remains

- HBM3E 12Hi NVIDIA certification delay led to a downgrade of 2025 HBM bit growth guidance from 50% to 12%.
- ASIC demand from AMD, AVGO, etc., expected to contribute meaningfully from Q4 2025.
- 1cnm technology has passed PRA and is entering risk production in Q4 2025, but mass production (MP) is more realistic by late Q1 2026.
- Recovery of technology leadership will take time (challenges include yield, lack of customer track record, and competitors' pre-contracts).

2) Foundry Division Showing Progress but Profit Improvement Not Yet

- Secured new orders for Exynos 2500 (foldable) and 8nm (Nintendo Switch 2).
- However, due to the absence of large advanced process orders for mobile/AI (e.g., QCOM 2nm), the timing of profitability turnaround will be delayed.

3) DX Division Maintains Healthy Margins Amidst Cost Pressures

- Despite rising component prices and tariff uncertainties, flagship model sales and economies of scale are expected to improve margins by +50bps year-over-year.
- New foldable product launch scheduled for July 9, consumer response in H2 is key.

4) Earnings Outlook and Target Price

- Q2 OP forecast: KRW 6 trillion.
- FY25E EPS: KRW 4,922 (down 8%), FY26E EPS: KRW 5,939 (up 1%), FY27E EPS: KRW 6,759 (newly introduced).
- Target price upgraded to KRW 71,000 (applying P/B 0.94x based on FY26E), current stock price is at 0.8x, more than 30% discounted compared to 10-year average.


Summary: Shares Goldman Sachs Buy on Besi, PT €146, on raised long-term guidance 20-30% above consensus driven by AI packaging demand.

Besi: Long-Term Guidance Raised, Growth Driven by AI and Next-Gen Packaging
Goldman Sachs (A. Duval, 12/06/25)

Goldman Sachs notes that Besi, during its 2025 Investor Day, raised its long-term revenue target from €1.0 billion to €1.5–1.9 billion, gross margin from 62–66% to 64–68%, and operating profit margin from 35–50% to 40–55%. This reflects its strong confidence in packaging demand from AI data centers, edge computing, and consumer electronics, and highlights that the accelerated adoption of advanced packaging technologies such as 2.5D/3D chipsets and wafer-level bonding will be the primary growth driver.

Long-Term Metrics Exceed Expectations

The new guidance midpoint revenue of €1.7 billion is about 20% higher than the Visible Alpha market consensus of €1.4 billion. The implied profit, calculated at a 48% EBIT rate, is also approximately 30% ahead of consensus, suggesting there is upside potential in the market's valuation of Besi's prospects.

Dual Drivers of AI Deployment and Advanced Packaging

Besi's management emphasized that the continued proliferation of AI in data centers and consumer applications, along with strong demand for next-generation packaging for logic/memory, will bring sustained incremental business for its wafer-level packaging and mainstream die attach operations.

Topics of Investor Focus

Goldman Sachs believes that investors will focus on the following four points: 1) Demand drivers in the logic and memory markets; 2) The adoption pace of technologies such as Hybrid Bonding and TCB (Thermo-Compression Bonding); 3) Changes in the industry's competitive landscape; 4) The recovery timeline for the mainstream die attach business.

Valuation and Risks

Goldman Sachs maintains a "Buy" rating on Besi with a 12-month price target of €146, based on a 27x CY26E EV/EBITDA multiple. Key risks include cyclical fluctuations in customer spending, delays in the rollout of hybrid bonding technology, and increased industry competition.

$BESI


Summary: GF Securities downgrades entire memory sector to Underperform; memory downturn from 4Q25 on tariffs, weak demand, HBM pricing pressure; SK Hynix least preferred.

GF Securities – Memory Sector: Downturn Approaching, HBM Pricing Pressured

– We downgrade the entire memory sector and assign an Underperform rating on Micron (MU US), SK Hynix (000660 KS), and SanDisk (SNDK US).

◾+ Sector slowdown and demand weakening intensifying
– Following a bottom in 1Q23, the memory sector is projected to post 10 consecutive quarters of improvement through 3Q25 — marking the longest upcycle since 2016.
– However, a downturn is increasingly likely starting from 4Q25. Key reasons include:
 1) Risk of a 25% tariff on electronics/semiconductors by the Trump administration
 2) Deteriorating global macro conditions → smartphone shipment growth to turn negative, PC shipments limited to +1~2%
 3) HBM pricing could also become a headwind

◾+ HBM and DRAM prices: Potential weakening from 3Q25
– As of CYQ2, memory pricing was stronger than expected (thanks to low smartphone inventories and preemptive restocking during the 90-day tariff waiver)
– 2Q25 DRAM/NAND contract pricing: QoQ +67% expected
– However, from 3Q25, price momentum is likely to slow due to weak demand and inventory pressure from servers and PCs:
 - Pricing increase of only around 0~5% or potentially flat
 - This flat trend may persist through 4Q25
◾+ Samsung’s entry to intensify HBM market competition
– Samsung is preparing to qualify HBM3e-12Hi with NVIDIA (possibly by June)
– NVIDIA is delaying 2026 HBM3e pricing negotiations pending Samsung’s qualification
– Samsung’s market entry in 2026 may trigger HBM4 price declines
 - Currently, HBM4 is priced at a 20% premium to HBM3e-12Hi
 - CXMT’s DDR5 production ratio also expected to reach 20% by end-2025
◾+ Stock preference
– 1st: Micron > 2nd: SanDisk > 3rd: SK Hynix
 - Micron: U.S.-based production → potential beneficiary of tariffs; gaining share in AMD/AWS
 - SanDisk: Focused on NAND → less exposed to HBM, relatively defensive
 - SK Hynix: Over 40% of DRAM revenue from HBM, but high exposure to HBM pricing pressure creates downside risk

✅ Conclusion: The memory sector is likely to peak in 3Q25, with a potential slowdown thereafter. HBM pricing headwinds and renewed U.S. tariff risk are expected to weigh on medium- to long-term valuations. Among covered names, Micron is viewed most favorably, while SK Hynix remains relatively conservative due to its large HBM exposure.


We downgrade the entire memory sector and assign an Underperform rating on… SK Hynix (000660 KS)


We downgrade the entire memory sector and assign an Underperform rating on… SanDisk (SNDK US)