Who is expected to benefit from the Nvidia (NVDA.US) AI chip industry chain being impacted by the change of coach rumor?
The Zhitong Finance App learned that potential beneficiaries were boosted by Nvidia's (NVDA.US) leadership turmoil. The market is betting that AMD (AMD.US), Broadcom (AVGO.US), and Alphabet (GOOGL.US) may win business from this chip giant, and the three companies' stock prices rose after the market.
Following reports that Nvidia's board of directors was preparing to remove CEO Hwang In-hoon, Nvidia fell 9% after the market, and AMD and Broadcom both rose more than 3% after the market. Huang Renxun once led Nvidia to become the company with the highest market capitalization in the world. Alphabet rose 0.3% after the market.
Earlier reports mentioned rumours of Hwang In-hoon's extramarital affair. After news broke that Nvidia's board of directors was preparing to remove him, the sell-off intensified. According to reports, Nvidia is cooperating with an external company to find a potential successor to Hwang In-hoon.
The market bets that competitors benefit
As Nvidia faces leadership uncertainty, rival hardware makers are getting a boost as investors want to hedge against Nvidia-related risks while continuing to lay out AI deals. This turmoil highlights that the market may fluctuate more significantly in the future, as investors are evaluating the impact of this incident on the development of AI and the extent to which customers spread their spending globally.
“In the accelerator market where Nvidia dominates, competitors such as AMD, Google TPU, and Amazon may have an opportunity to increase market share,” said analyst Mandeep Singh. “There is no doubt that Nvidia will not be as aggressive in setting goals and exceeding them as it was in the past two or three years.”
He added that given recent developments, Wong In-hoon's potential successor is likely to be “quite conservative” in terms of company leadership.
AMD and Broadcom: the most immediate potential winners
AMD and Broadcom could benefit most if Nvidia's leadership issues disrupt their customer relationships. AMD is Nvidia's strongest competitor in the field of AI graphics processors (GPUs) and is working to weaken its dominant position in the market; while Broadcom's position in the field of customized AI chips and networks is growing.
Although changes in Nvidia's leadership may prompt customers to reconsider their reliance on a single vendor, competitors such as AMD and Broadcom are already operating in AI accelerators, custom chips, and networks.
“As a direct competitor, AMD, as well as Alphabet and Broadcom, are natural short-term beneficiaries,” said Anna Wu, investment strategist and founder of Floodlines Research. “The Hwang In-hoon scandal has raised public questions about Nvidia's trade secrets and product advantages.”
She added that Alphabet's TPU was customized for AI, while the GPU was initially a multi-purpose chip designed for games. TPUs can't completely replace GPUs, and shifting AI workloads off Nvidia is slow and expensive.
Alphabet announced plans to launch a broader AI chip product lineup this week, aiming to capitalize on its rapid rise as Nvidia's main challenger to enter this hundreds of billion dollar market. The company will launch two new TPU variants.
Supply chain partner performance differentiation
Other beneficiaries include companies that support hyperscale cloud vendors to develop their own chips.
On Thursday, MediaTek, which collaborates with Google to develop custom chips, rose 3.3% in the Taipei stock market. Design service companies Shixin Electronics and Creative Electronics both rose more than 8% in the Taipei stock market, and the market expects growing budgets to flow into the custom hardware sector.
Nvidia's manufacturing partners seem largely unaffected by this turmoil, as they also supply Nvidia's rivals. But if Nvidia's uncertainty causes supplier relationships to be reshuffled, Samsung Electronics could benefit even more. Samsung's performance outperformed its memory chip competitor SK Hynix by more than 1 percentage point, while TSM.US stock price remained flat.
Samsung has established increasingly close ties with AMD, and SK Hynix is still Nvidia's main supplier of high-bandwidth memory. During AMD CEO Su Zifeng's visit to Seoul in March of this year, Samsung agreed to cooperate with the American chipmaker on next-generation AI memory and computing technology. AMD is Nvidia's biggest challenger in the field of AI chips.
“Nvidia's potential leadership changes could create strategic opportunities for Samsung,” said Jung In Yun, CEO of Fibonacci Asset Management Global. “If Hwang In-hoon leaves, the new management may re-evaluate supplier relationships and place more emphasis on supply chain diversification, which gives Samsung an opportunity to deepen cooperation with Nvidia.”
In addition to the storage giant, a number of South Korean startups, including AI chip maker FuriosaAI and Samsung-backed MangoBoost, are also seeking to encroach on Nvidia's dominant position with alternative technology.
Local alternative camps are in the spotlight
The storm could also benefit Chinese companies promoting Nvidia alternatives in their home markets. At the same time, America's stricter export rules have increased scrutiny of chip sales to China.
If the relevant review is further tightened, it will bring certain benefits to local chip manufacturers such as Cambrian, Haiguang Information, and SMIC. At one point, it rose 13% during the Cambrian period, while Haiguang and SMIC both rose more than 5%.
Wu said that the adjustment of Chinese technology stocks began much earlier than in the US, and if the decline in the US market intensifies, investors may view undervalued Chinese technology stocks as potential hedging tools.
“But from a structural point of view, unless Chinese technology companies find solutions in advanced chips, I think it will be difficult to break into Nvidia's market share,” she said.