Nvidia, the Leader in the AI Semiconductor Market: Its Current Success and Expectations for Japanese Companies

In recent years, the AI semiconductor market has experienced explosive growth, driven by advancements in artificial intelligence (AI) technology. At the heart of this growth is Nvidia, a major US semiconductor company. Its stock price has reached record highs, temporarily surpassing Apple in market capitalization to reclaim the top spot globally. This surge reflects heightened expectations for the expanding demand for next-generation semiconductors essential for processing generative AI data.

Nvidia's Overwhelming Strength: AI Semiconductor Demand and Excellent Financial Results

Nvidia's strength lies in its dominant market share in GPUs (graphics processing units) specialized for AI processing. Originally focused on image processing for gaming and other applications, GPUs have become central to AI development due to their compatibility with deep learning. In particular, GPUs such as the H100 series, specifically designed for AI processing, are selling explosively. In the fiscal quarter from November 2023 to January 2024, net profit increased 8.7 times year-on-year, and sales increased 3.7 times, both reaching record highs. Sales in the data center segment increased fivefold, demonstrating the remarkable growth driven by the increasing demand for AI semiconductors and significantly boosting Nvidia's performance.

The Ecosystem Supporting Nvidia's Success: Collaboration with TSMC

Nvidia's success is not solely due to its own efforts. Its long-standing, positive relationship with Taiwan Semiconductor Manufacturing Company (TSMC) is also a crucial element supporting its growth. TSMC manufactures GPUs for Nvidia, and its advanced technology and production capacity ensure a stable supply for Nvidia. TSMC also reported record-high sales and net profit in its July-September 2024 quarter, suggesting that the strong collaboration between the two companies is mutually beneficial.

Japanese Companies' Contributions: Manufacturing Equipment and Materials

In the AI semiconductor market, Japanese companies play a key role in manufacturing equipment and materials. Tokyo Electron boasts a top global share in etching equipment and photoresist application/development equipment, while Disco holds the top global position in wafer dicing equipment. Furthermore, Shin-Etsu Chemical and SUMCO account for over 60% of the global silicon wafer market share. Without the technological capabilities of these Japanese companies, AI semiconductor manufacturing would not be possible.

Future Outlook: The Spread of On-Device AI and Advancements in Packaging Technology

Currently, AI semiconductors are primarily used in servers in data centers; however, the future is expected to see the spread of on-device AI, integrating AI functionality into devices such as smartphones and personal computers. The proliferation of on-device AI will increase the demand for faster, higher-capacity memory semiconductors, providing further growth opportunities for Japanese manufacturers of equipment and materials. Furthermore, advancements in packaging technology, which involves integrating multiple chips, are crucial for improving semiconductor performance. Japanese companies with strengths in backend processes are expected to play an active role in this area.

Investor Perspective: Focus on AI Semiconductor-Related Companies

The expansion of the AI semiconductor market presents a significant opportunity for related companies. Investors need to identify companies that benefit from AI semiconductors. Attention is focused not only on AI semiconductor manufacturers like Nvidia, but also on Japanese companies that manufacture equipment, materials, and inspection equipment. However, caution is needed, as the semiconductor industry is subject to volatile market conditions. A long-term perspective is crucial when considering investments in companies supporting the evolution of AI technology.

Summary

The AI semiconductor market is experiencing rapid growth, spearheaded by Nvidia. Japanese companies also play a crucial role in manufacturing equipment and materials, and further development is expected in the future. The evolution of AI technology will bring about significant changes to society as a whole. It is essential to monitor the trends in the AI semiconductor market and focus on the companies driving its growth.