Seek .(US:SKLTY)2025-02-12 02:01Summary of Key Points from the Conference Call Industry Overview - Industry: Asia Tech Hardware, specifically focusing on AI supply chain and related companies - Key Event: Recent sentiment correction in the AI supply chain anticipated for 2H25, with implications from DeepSeek and U.S. tariffs on the supply chain [1][2] Core Insights - DeepSeek Panic: The market's concern regarding DeepSeek's impact on AI server demand is considered exaggerated. Companies in the AI sector have been improving models using software and hardware since 2022. Consensus estimates for hyperscaler capital expenditures (capex) have been revised upward, indicating a growth of 31% in 2025 and 6% in 2026 [2][14] - Energy Efficiency: The Jevons paradox is observed, where improvements in GPU energy efficiency (from 1200 joules/token to 0.4 joules/token) have led to increased overall computation and power demand. Data centers are projected to consume 4.6-9.1% of U.S. annual electricity generation by 2030 [2][14] - Mass Adoption of AI: Declining costs of training and inference, as seen with DeepSeek, are expected to drive mass adoption of AI technologies among consumers and enterprises [2][14] Tariff Implications - U.S. Tariffs: President Trump announced 25% tariffs on Mexico and Canada, and 10% on China. Companies like Quanta and Delta are affected, with Quanta's new PC site in Vietnam expected to help regain market share in MacBook production [3][25] - Impact on EV Demand: The new tariff on Mexico may negatively affect electric vehicle (EV) demand in the U.S., a critical market for Delta [3][25] Company-Specific Insights Delta Electronics - Earnings Outlook: Expected gross margin (GM) decline in 4Q24 due to a lower power electronics mix. However, operating profit margin (OPM) is projected to grow significantly year-over-year driven by operating leverage [4][30] - Key Focus Areas: AI server power, liquid cooling, recovery of automation and EV sectors, and tariff implications [4][30] Unimicron Technology - Market Position: Anticipated to capture a 20% share in Blackwell ABF substrates by mid-2025. EPS expected to more than double this year [5][49] - Challenges: Strong GM recovery may be delayed to 2Q due to yield improvement timelines [5][49] Chroma ATE - Revenue Estimates: Revenue expected to grow by approximately 10% from SLT and 8% from metrology this year. Revenue recognition may be uneven, with potential dips in 1H25 [6][64] - Market Catalysts: Upcoming GTC event in mid-March is seen as a near-term catalyst [6][64] Quanta Computer - Cautious Outlook: Concerns over GB200 ramp-up and AI server gross margin drag. Expected revenue growth in AI server segment but facing challenges in gross margin and working capital needs [7][75] - Market Share Recovery: Anticipated recovery in MacBook market share due to new production in Vietnam [7][75] Additional Considerations - Investment Implications: Delta is rated as a top pick due to its diversified product portfolio and resilient earnings quality amid volatile AI sentiment. Unimicron and Chroma are also rated outperform, while Quanta is rated underperform due to inflated consensus EPS [10][11][12][74] - Valuation Metrics: Delta's forward P/E is at 22x, Unimicron at 10x, and Chroma at 20x, indicating potential investment opportunities based on growth projections [11][12][72][74] This summary encapsulates the key points discussed in the conference call, highlighting the industry dynamics, company-specific insights, and potential investment implications.