Asian semiconductor stocks got a fresh boost from a stellar set of results at Nvidia Corp., the standard bearer of the artificial intelligence theme that propelled gains in the sector earlier this year.

The Bloomberg Asia Pacific Semiconductors Index climbed nearly 3%, the most since July 11. A trio of Nvidia suppliers seen as among the region’s biggest beneficiaries of the AI boom boosted the gauge, with South Korea’s SK Hynix Inc. and Japan’s Advantest Corp. each jumping more than 5% and Taiwan Semiconductor Manufacturing Co. rising about 2%.

Nvidia’s results for the latest quarter and its outlook for the current period trumped analyst expectations on a surge in demand for its AI processors. The emerging technology has helped the US chipmaker overcome a slump in more traditional semiconductor business, and driven its share price to more than triple in value so far in 2023.

The latest blowout results sent Nvidia shares soaring 10% in US post-market trading Wednesday. The jump provided a fresh tailwind for Asian chip stocks, helping the Bloomberg Asia chip gauge pare its decline from a June high. The measure is still up 19% year to date.

“Nvidia’s post-market surge is favorable,” said Seo Sang Young, a strategist at Mirae Asset Securities Co. “It has raised expectations for the AI industry that it isn’t just a temporary theme.”

The US chipmaker’s results “came in stronger than expected on datacenter/AI demand strength from hyperscalers including Amazon, Google, Meta, and Microsoft,” Citigroup Inc. analyst Carrie Liu wrote in a note. This is positive for tech stocks including Taiwan’s Quanta Computer Inc. and Wistron Corp. as “AI enablers,” she added.

While the AI rally is getting a fresh leg up, risks remain for stock investors, including valuations. Advantest is trading at about 10 times book value while Nvidia is at 48 times, both having reached all-time high levels this year.

Stocks flying so high are subject to big drops if results disappoint. And if competing products emerge, prices of Nvidia chips could tumble said Lee Seung-Woo, an analyst at Eugene Investment & Securities Co.

“It’s a matter of how long this peak will be maintained and whether its rivals can catch up,” he said.

— With assistance by Lianting Tu

Source: Bloomberg

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