Investment Rating - The report upgrades Aspeed Technology from Equal-weight to Overweight with a price target of NT$5,000 and raises Montage Technology's price target to Rmb100 from Rmb88 [6][35]. Core Insights - The report indicates a shift in perspective on cloud semiconductors, moving from a neutral stance to a positive outlook as a potential trough in cloud capital expenditures (capex) is anticipated in 4Q/1Q26, with US tariff impacts already priced in [2][33]. - Strong growth in US cloud capex is projected, with a year-over-year increase of 38% in 2025, marking it as the third strongest year of capex growth in the past decade [10][12]. - The report highlights that the market may be underestimating the upside risks associated with CPU and non-standard AI server demand, particularly with the ramp-up of GB racks and increased semi content in servers [9][4]. Summary by Sections Cloud Semiconductor Outlook - The report suggests that the cloud semiconductor cycle is likely to trough soon, with earnings revisions expected to bottom out and improvements in GB rack yield [2][3]. - General server demand has exceeded expectations in the first half of the year, driven by inference demand and alternative GPU solutions, indicating sustained demand into the second half [3][4]. Company-Specific Insights - Aspeed's earnings downgrades are believed to have reached a bottom, prompting an upgrade to Overweight due to anticipated earnings momentum [5][41]. - Montage is expected to benefit from the adoption of advanced interfaces by China server brands, with a projected earnings growth of 25% CAGR from 2024 to 2027 [5][33]. Financial Projections - The report raises earnings estimates for Aspeed by 9% for 2025, 8% for 2026, and 31% for 2027, while Montage's earnings are raised by 9% and 11% for 2026 and 2027, respectively [5][33]. - Montage's valuation appears attractive at 38x the estimated EPS for 2026, especially given the forecasted earnings growth [5][41]. Market Trends - The report notes that the cumulative capex from the top 11 global cloud players is expected to reach US$392 billion in 2025, representing 16.6% of their revenue, which is an all-time high [10][12]. - The anticipated increase in semi content in servers is linked to enhanced security functions, which will likely benefit companies with comprehensive product offerings [4][9].

Key Takeaways from the Taipei Computex Industry Overview - The report focuses on the Asia Tech Hardware industry, particularly highlighting developments from the Taipei Computex event held from May 20 to May 23, 2023. Key companies involved include Foxconn (2317 TT), Auras (3324 TT), Lite-on (2301 TT), Lotes (3533 TT), Winway (6515 TT), AVC (3017 TT), and Zhending (4958 TT) [1][1]. Core Insights - **GB300/B300 Display**: The GB300/B300 display was a focal point at the Computex, featuring computing trays with Cordelia interfaces and 20 sets of quick disconnect (NVQD). The GB300 is expected to adopt the Bianca design moving forward [2][2]. - **Component Shipments**: Component shipments for GB300 servers are anticipated to commence in Q3 2025, with limited rack shipments expected in Q4 2025. For the GB200, supply chain bottlenecks have been resolved, potentially increasing rack shipments to 7-8K in Q2 and reaching 10K in Q3 2025 [2][2]. - **Nvidia Collaboration**: Suppliers involved in the Cordelia design, such as Lotes, will continue to work with Nvidia to address issues in the new compute tray design planned for 2026 [2][2]. - **Market Confusion**: Investors expressed confusion regarding similar products from various suppliers at Computex. Inclusion in Nvidia's verified list (NVL) is crucial for securing orders, as CSPs ultimately determine key component suppliers [2][2]. - **Liquid Cooling Solutions**: Delta has gained significant traction among hyperscalers, with liquid cooling revenue expected to exceed NT$20 billion this year. Early entrants like AVC and Delta maintain healthy profitability despite competition [2][2]. Future Trends - **Datacenter Cooling Solutions**: Liquid-to-liquid (L2L) cooling and 800V HVDC are emerging as future solutions for datacenter cooling and power. New datacenters are increasingly adopting L2L solutions, while Nvidia collaborates with suppliers for 800V HVDC to support 1MW server racks by 2027 [2][2]. Investment Ratings - **Quanta Computer Inc (2382.TT)**: Rated Underperform with a target price of NT$240 [5][5]. - **Chroma ATE Inc (2360.TT)**: Rated Outperform with a target price of NT$480 [6][6]. - **Delta Electronics Inc (2308.TT)**: Rated Outperform with a target price of NT$490 [7][7]. - **Unimicron Technology Corp (3037.TT)**: Rated Outperform with a target price of NT$165 [7][7]. - **Luxshare Precision Industry Co Ltd (002475.CH)**: Rated Outperform with a target price of RMB47 [7][7]. Risks and Considerations - **Quanta Computer Inc**: Risks include higher-than-expected demand for AI servers and lower-than-expected demand for AI chips [49][49]. - **Chroma ATE Inc**: Risks include competition in the AI chip market and slower EV penetration [49][49]. - **Delta Electronics Inc**: Risks include competition in AI server power components and potential delays in the recovery of the automation market [55][55]. - **Unimicron Technology Corp**: Risks include weaker-than-expected demand for key products and margin pressures [55][55]. - **Luxshare Precision Industry Co Ltd**: Risks include competition and slower-than-expected market recovery [55][55]. Additional Insights - The report emphasizes the importance of securing orders through Nvidia's verified supplier list and highlights the competitive landscape among suppliers in the Asia Tech Hardware industry [2][2].