Sinolink: Strong demand for AI, focus on the direction of the third-quarter report exceeding expectations.

Sinolink released a research report indicating optimism towards AI-PCB and core algorithm computing hardware, as well as the Apple industry chain and industries benefiting from self-controllable technologies. Recently, there have been continuous increases in AI investments by major North American companies, with an increase in CoWoS demand, as well as positive news regarding orders for 800G, 1.6T optical modules, and AI-PCB components. Various companies will be releasing their third-quarter reports soon, and it is recommended to pay attention to companies in the deep AI algorithm computing industry chain, as third-quarter performance or fourth-quarter guidance is expected to exceed expectations. The bank believes that the surge in downstream reasoning demand is driving strong growth in ASIC demand, as NVIDIA's technology continues to advance, leading to a rise in both price and volume of PCB components. Currently, many AI-PCB companies have strong orders, are operating at full capacity, and are actively expanding production. The second half of the year is expected to see high growth in performance. AI copper boards also have strong demand, and as overseas production of copper boards expands slowly, leading mainland manufacturers are expected to benefit actively. The positive outlook continues for AI-PCB, core algorithm computing hardware, the Apple industry chain, and industries benefiting from self-controllable technologies. Industry-specific economic indicators are as follows: Consumer electronics (stable and increasing), PCB components (accelerating growth), semiconductor chips (steady growth), semiconductor outsourcing/equipment/materials (steady growth), displays (bottoming out), passive components (steady growth), and packaging testing (steady growth). Sinolink's main points include: - Strong demand for AI, focusing on third-quarter reports exceeding expectations. The continuous strong demand for AI has led to impressive third-quarter results from global AI industry chain companies. On October 23, Shengyi Electronics released a performance forecast for the third quarter, with a revenue of 28.4-32.6 billion yuan, a year-on-year increase of 135-170%, and a profit of 5.4-6.2 billion yuan, a year-on-year increase of 504-592%. Revenue and profit have exceeded expectations, showing strong demand from overseas AI customers. There have been continuous investments in AI by major North American companies, with an increase in CoWoS demand, and positive news regarding orders for 800G, 1.6T optical modules, and AI-PCB components. - TSMC is optimistic about AI demand, expecting a CAGR of around 45% for AI revenue in the years 2024-2029. The exponential growth in the number of tokens reflects the strong real demand for AI computing power. TSMC sees the gradual rise in national AI initiatives, strong customer forecasts, and strong signals from customers, as well as an expected increase in CoWOS production expansion and AI demand guidance in the first quarter of next year. Upcoming third-quarter reports from various companies are expected to exceed expectations. With strong demand in AI servers, switches, optical modules, and storage chips, demand for AI copper boards is high, with some products experiencing price increases. The trend of price increases in storage chips continues, with some DRAM and Flash products from original manufacturers having suspended quotes. According to TrendForce data, there is a strong imbalance in supply and demand in the DRAM spot market this week. Although some factories are temporarily reluctant to sell in the first half of the week, waiting for a price increase, spot purchases are still being pushed up. Kingston's price adjustment and limited shipments, combined with the general expectation of tight supply in the fourth quarter, especially with end customers stocking up early to avoid further price hikes, have led to a more obvious demand momentum for spot purchases. The bank believes that the strong demand for AI will lead to an increase in NVIDIA AI server shipments in the fourth quarter, with the industry chain actively stepping up shipments. As we enter the third-quarter performance period, driven by strong demand for algorithm computing, AI hardware performance is expected to continue to grow. Overall, there is continued optimism towards AI-PCB, core algorithm computing hardware, the Apple industry chain, and industries benefiting from self-controllable technologies. Risk warnings include unexpected delays in demand recovery, unmet expectations in AIGC progress, and further escalation of external sanctions.