Worst Over? Institutional Investors: AI Concerns Ease, Driving Rebound in 'Oversold' Stocks – PCB Sector Regains Favor

Asian equities traded mixed today (3rd), while Taiwan's stock market continued its rebound. Institutional investors noted that while large-cap stocks showed relative weakness, sectors that had undergone deeper corrections—such as memory, ABF substrates, PCBs, and passive components—demonstrated strong recovery momentum. After Microsoft and Amazon reported better-than-expected earnings last week, market concerns about AI investment efficiency and potential bubbles have eased, leading to renewed investor interest in previously oversold AI-related component supply chains. With stock prices having undergone a correction, valuations across these sectors have fallen to levels now considered attractive for investment. The market widely believes the worst may be behind us.

Looking back since last year, memory, passive components, and the PCB sector have all delivered strong performance, with several stocks rising multiple-fold, becoming market focal points. However, compared to memory and passive components, the PCB sector's earlier rally lagged. Analysts point out that with rapidly growing demand for AI servers, high-performance computing, and data centers, demand for high-end PCBs is surging. Upstream materials and process consumables are also seeing tightened capacity. Beyond ABF substrates, supply chains for CCL (copper-clad laminates), fiberglass cloth, and fiberglass yarn are also expected to benefit.

Encouraged by capital inflows, the PCB sector performed strongly today, with multiple stocks hitting their daily trading limits. This included ABF substrate manufacturers Unimicron (3037-TW) and Kinsus (3189-TW); CCL producers TTM Technologies Taiwan (6274-TW) and Laminates (6213-TW); and leading electrolytic copper foil manufacturer Jinju (8358-TW), all becoming market highlights.

Goldman Sachs noted that as AI computing demand continues to expand, customized chips (ASICs) may grow even faster than GPUs, further boosting demand for key components like PCBs and ABF substrates. Given that high-end products still face yield and capacity constraints, the related supply chain is expected to become the next market focus.

Anticipating AI-driven growth in high-end PCB demand, CTBC Asset Management plans to launch the 'CTBC Taiwan-Japan-Korea PCB ETF (009828-TW)' from August 17 to August 20. The fund will focus on leading PCB companies in Taiwan, Japan, and South Korea, covering upstream to downstream segments including materials, substrates, and manufacturing, tracking the NYSE TIP Taiwan-Japan-Korea PCB Index. Taiwan stocks will account for over 50% of the portfolio, with the remainder allocated to Japanese and Korean firms.

CTBC Taiwan-Japan-Korea PCB ETF portfolio manager Yeh Sung-Hsuan stated that high-end substrate capacity utilization is nearing full, and overall supply remains tight. With no clear signs of cooling in AI infrastructure demand in the short term, the growth momentum for the PCB industry is expected to continue, making the sector's outlook promising.

Yeh further emphasized that in the high-end substrate market, Taiwan, Japan, and South Korea collectively hold around 90% of global market share, effectively dominating global supply. As AI demand continues to expand, the entire supply chain—from upstream materials to midstream substrates and downstream PCB manufacturers—is poised to benefit, positioning the sector as a key beneficiary of the AI industry upgrade trend.

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