US Power Grid 'Emergency'… AI Infrastructure Investment in Focus

The current market lacks a clear dominant sector, leading to a rapid concentration of supply and demand in sectors experiencing minor positive news, such as robotics, bio, and power. This indicates that as investor sentiment recovers, the market is reacting sensitively to small news.

NVIDIA announced 'monster earnings' that exceeded expectations, resolving market uncertainties. After the earnings announcement, the conference call met market expectations, leading to an upward trend in pre-market extended-hours trading. This, along with confirmation of PC indicators, positively influenced the market.

NVIDIA's Chief Financial Officer (CFO) stated that revenue could grow by 70% next year compared to this year, providing guidance that surpassed market expectations. This figure is 26 percentage points higher than the market's estimate of 44%, driving a 4-5% increase in pre-market trading. However, there appear to be supply chain bottlenecks relative to current demand.

The demand for AI adoption is rapidly surging, extending beyond hyperscalers to cloud companies. Starting in the fourth quarter of this year, AI demand from cloud companies within data centers is exploding, with a goal to achieve 8GW of installed capacity by the end of 2025, triple the current capacity.

NVIDIA did not include China data center computing revenue in its future outlook, considering ongoing geopolitical uncertainties. Kim Jun-ho, Manager, stated, "Due to ongoing geopolitical uncertainties, China data center computing revenue was not included in the outlook." This suggests that the 70% revenue growth forecast for next year excludes China, yet still anticipates strong growth.

Koh Young has begun supplying CAMM2-related inspection equipment to a domestic memory company, marking its first such case. Kim Jun-ho, Manager, stated, "This is Koh Young's first case of supplying CAMM2-related inspection equipment. We plan to officially enter the next-generation memory inspection equipment market through this opportunity." This indicates a plan to actively respond to and expand business in the CAMM2 market, a core technology for next-generation AI infrastructure.

Based on the Monetary Policy Board's dot plot, a 3.25% interest rate is the dominant outlook until June next year. Accordingly, it is anticipated that interest rates will be raised one more time within the next six months, specifically by February next year.

Recently, major investors such as Nancy Pelosi and Peter Thiel have been concentrating their stock portfolios on AI infrastructure power-related stocks. Nancy Pelosi newly included 'Bloom Energy,' a solid oxide fuel cell company, while Peter Thiel made large-scale investments in AI-related power and energy companies like Vistra, DT Energy, and X-Energy. Kim Jun-ho, Manager, explained, "Recently, stock portfolios have been concentrating on AI infrastructure power. So this aligned perfectly, and ultimately, Bloom Energy and Intel and Bloom Energy were newly added."

Kim Jun-ho, Manager, selected LS ELECTRIC as the biggest beneficiary in the era of AI power infrastructure. He assessed that LS ELECTRIC would receive the cleanest benefits as the US moves to self-procure transformers, circuit breakers, and inverters for the power grid, excluding Chinese companies. LS ELECTRIC covers the entire power infrastructure, including transformers, circuit breakers, inverters for the power grid, and ESS conversion devices, targeting the distribution market, which is six times larger than the US transmission market.

Kim Jun-ho, Manager, selected LS ELECTRIC as the 'top pick' within the power sector, evaluating it as the most promising when considering its content, stability, and earnings comprehensively. LS ELECTRIC possesses a broad portfolio covering transformers, circuit breakers, distribution solutions, and ESS. Iljin Electric, which also covers cables, was seen as undervalued due to its high order backlog ratio, while Gaon Cable's strength is its supply contract with hyperscalers, but a recent 25% surge made new entry burdensome.

Hanmi Pharmaceutical achieved technology transfers worth 3.2 trillion won to Roche subsidiary Genentech and 1.9 trillion won to Eli Lilly, significantly contributing to over 17 trillion won in domestic technology exports from January to August this year. It ranks first in cumulative technology export performance among listed companies, excluding unlisted ones. Kim Jun-ho, Manager, suggested maintaining a buy-on-dips approach, stating, "In the case of Hanmi Pharmaceutical, I believe it will remain the leading stock for some time, unless more powerful technology transfer news emerges, so it's best to buy on dips."

Despite the Monetary Policy Board's decision to raise interest rates, investment sentiment in the bio sector is showing signs of recovery. Hanall Biopharma showed an upward trend, and Alteogen also maintained a solid performance, closing flat. This suggests that expectations for technology transfers, rather than macroeconomic variables, are driving investment sentiment.

Alteogen achieved successful results in its combination therapy clinical trial with Keytruda. Kim Jun-ho, Manager, stated, "Because it was a combination therapy with Keytruda, we highly anticipated the success of the clinical trial. If the use of Keytruda SC expands in the future, expectations for Alteogen's royalty and milestone inflows are bound to be high." This factor raises expectations for Alteogen's royalty and milestone inflows if the use of Keytruda SC formulation expands, and further technology transfer possibilities are also anticipated.

As the commercialization of humanoid robots draws near, expectations for K-robot parts stocks are growing. Government support policies are expanding, and major robot companies like Boston Dynamics are presenting commercialization roadmaps. Kim Jun-ho, Manager, stated, "Humanoid commercialization is coming soon, so K-robot parts stocks will rise." However, short-term volatility also exists, such as selling pressure after Hyundai Motor CEO's Investor Day.

Kim Jun-ho, Manager, suggested LG Electronics over Hyundai Motor as the leading stock in the robot sector, believing that LG Electronics has a high possibility of a large-scale contract with NVIDIA. He stated, "I told you it would be LG Electronics rather than Hyundai Motor. So, I said it could be Robotis and Hanla Cast," proposing Robotis and Hanla Cast as top picks in robot stocks.

Kim Jun-ho, Manager, judged Hanmi Pharmaceutical's adjustment as a process of volume digestion rather than news exposure. The possibility of additional technology transfer for Hanmi Pharmaceutical still exists, and he emphasized the need to approach this as an opportunity to buy on dips and accumulate shares, expecting a second price surge. He advised, "In the case of Hanmi Pharmaceutical, whenever there's a dip, approach it with a buy-on-dips perspective, and you need to accumulate shares as a second surge will definitely occur."