In the first half of this year, many A-share listed companies related to AI have achieved remarkable performance. This is due to the continued growth of storage industry demand driven by factors such as AI. In the second half of the year, demand in the PC (personal computer) and smartphone markets is expected to rebound, driving an increase in shipments of storage products such as NAND Flash.

Judging from market trends, Guanghe Technology recently stated that demand for general-purpose servers continues to grow steadily, while demand for AI servers is growing rapidly despite starting from a smaller base compared to general-purpose servers. As a result, the proportion of AI server business will gradually increase.

A new wave of AI server demand is poised to erupt.

01

Efforts from Ultraman and Musk Join Forces

OpenAI and Musk are simultaneously pushing forward AI development, igniting a new wave of AI server demand. This presents business opportunities for Taiwanese contract manufacturers such as Quanta Computer, Wistron, Wistron InfoComm, and Inventec.

OpenAI's ChatGPT has gained immense popularity in the global generative AI market, with the latest weekly active user count exceeding 200 million, doubling from November last year. Additionally, 92% of Fortune 500 companies have adopted ChatGPT services, and commercial model subscribers have surpassed one million. It is rumored that OpenAI executives are discussing setting higher subscription prices for their next large language model.

Industry insiders point out that the surge in ChatGPT users not only reflects the increasing market acceptance of AI tools but also demonstrates the business community's emphasis on generative AI technology. OpenAI currently dominates and leads the AI field.

As OpenAI's commercial model subscriber base grows steadily, new developments in the next-generation GPT 5 have also emerged. Jung-Bae Lee, President of Samsung's Memory Business, revealed at SEMICON Taiwan 2024 that the new GPT 5 will have up to 3 to 5 trillion parameters and be trained using 7,000 NVIDIA B100 chips. Its launch is expected this year.

Meanwhile, Ultraman's efforts to secure global investor funding for AI infrastructure projects are gradually coming to light. It is rumored that the initiative will start in various U.S. states, involving the construction of data centers and expansion of semiconductor factories. The investment is expected to reach tens of billions of dollars, further fueling the AI server wave.

Coincidentally, Musk's AI endeavors are also in full swing. Musk announced that his new AI company xAI has deployed 100,000 NVIDIA H100 chips to create Colossus, a supercomputer claimed to be the world's most powerful AI training system. It recently went live.

Musk also revealed plans to double the scale within the next few months, increasing the number of H100 chips from 100,000 to 200,000, including 50,000 H200 chips.

The combined efforts of Ultraman and Musk will ignite a powerful growth engine for AI chip demand, driving up AI server demand simultaneously. Contract manufacturers such as Quanta Computer, Wistron, Wistron InfoComm, and Inventec will soar on this AI growth train. Yang Qi, Executive Vice President of Quanta Computer, said that AI development will continue to improve in the second half of the year, with AI demand rising steadily. Although some products are transitioning, demand for existing products such as NVIDIA's Hopper architecture remains strong.

02

Can AI Servers Save the Slumping Smartphone Market?

The smartphone industry is facing a new turning point.

Foxconn, Apple's primary manufacturing partner, reported record-high sales of NT$548.3 billion (US$17.1 billion) in August, marking a significant increase from the 22% growth in July. Foxconn's revenue recovery from the long-term smartphone downturn is attributed to its growing server business, which includes NVIDIA AI accelerators for data center operators. In July, Foxconn forecast revenue growth for the remainder of the year, reversing several quarters of decline. The company's share price has risen nearly 70% in 2024.

Why? Foxconn has set a goal of securing a 40% share of the global AI server market, leveraging its relationships with major global tech companies and manufacturing expertise.

Bill Gates once stated, "ChatGPT is as important as the invention of the internet and will change the world."

This change essentially transforms human-machine interaction, which is gradually becoming a reality through AI-powered smartphones. On January 18, Samsung officially unveiled its new flagship S24 series, emphasizing AI capabilities and declaring the dawn of a new era of mobile AI. The new devices introduce various AI features, including video AI processing, AI chatbots, image processing, and real-time call translation.

In September, Huawei and Apple held press conferences on the same day, with AI undoubtedly taking center stage at Apple's event.

Apple Intelligence, introduced at Apple's Worldwide Developers Conference in June, is a comprehensive AI suite that Apple describes as a generative AI system based on personal scenarios. It offers intelligent functions such as assistance and image creation, akin to the AI large models employed by Android phone manufacturers. Apple plans to integrate it into all its devices, realizing intelligent networking within the iOS closed-loop system.

Earlier, it was widely anticipated that Apple's iPhone 16 would be the company's first AI-powered phone, potentially sparking a replacement trend. This anticipation fueled a surge in Apple-related stocks in the A-share market leading up to Apple's autumn product launch event.

An AI phone must, at a minimum, offer the general AI functions currently available, such as AI image removal, document organization, meeting minutes, and sound differentiation. Some AI phones also offer proactive services, like learning user habits and offering relevant services in different contexts, including one-click taxi booking.

AI phones must also be equipped with large AI models on the device side and have the capability to access cloud-based large models. Due to the vast amounts of data processed by AI large models, AI phones have higher requirements for memory, chips, storage, heat dissipation, and battery life compared to regular phones. Apple's iPhone 16 series indeed qualifies as an AI phone, both in terms of hardware and software, marking the company's first AI-powered phone.

With upgrades to chips, memory, camera buttons, and other hardware, Apple has clearly prepared its devices for future demands, particularly those requiring large memory to handle AI workloads involving large language models. These upgrades pave the way for more personalized and enhanced features driven by Apple's intelligence. Specifically, the iPhone 16 abandons the previous practice of using last year's Pro-version chips in its lower-end models, upgrading the entire lineup to the A18 chip series and increasing memory from 6GB to 8GB across the board. The camera button now supports AI-driven visual intelligence functions, allowing users to search for content and products using images, display business hours and ratings, and boasts enhanced heat dissipation and battery life.

Huawei's Mate XT, the world's first triple-folding smartphone, similarly highlights AI features as a major selling point, attracting numerous fans. Like other Huawei flagship products, the Mate XT boasts exceptional communication capabilities, supporting Tiantong satellite communications for connectivity in areas without terrestrial networks. In daily use, it leverages AI algorithms to intelligently select the optimal network, ensuring stable and seamless connectivity even in weak network environments like elevators and subways.

Furthermore, the Mate XT integrates deeply with the Pangu large model, enabling Xiaoyi to understand user intentions and act as a text editor, information consultant, translator, and more, enhancing convenience in daily life, work, and study. Its AI removal, AI cloud enhancement, and AI image expansion capabilities are also outstanding, effectively rescuing unusable photos on the phone.

Nowadays, global tech companies are racing to incorporate AI into their products, with smartphones poised to become one of the most critical battlegrounds.

03

The AI Computing Power Black Hole Can Only Be Confronted by Upgrading Servers

AI-driven computing power demands are virtually limitless. In the cloud computing era, much focus has been on optimizing idle computing power and innovating the middleware and software layers, essentially fostering a shared economy rather than a technological revolution. However, in the face of new-era demands, enhancing server and cluster computing power has become the most critical factor, necessitating hardware technology upgrades that cannot be overlooked.

The primary difference between AI servers and traditional servers lies in their reliance on high-performance GPUs and HBM to deliver outstanding heterogeneous computing capabilities. This approach becomes the only viable hardware solution to fill the computing power black hole. For example, in AI training servers, GPUs account for over 70% of the cost, while in general-purpose servers, this figure is less than 20%. The evolution of server platforms has shifted from following Intel CPU generational changes to tracking NVIDIA GPU advancements. Consequently, the value of a single server has soared from around US$10,000 to approximately US$200,000. NVIDIA has undoubtedly emerged as the biggest winner in the AI server revolution, with its market value skyrocketing from US$300 billion to US$3 trillion.

According to the latest research report from CITIC Securities, the computing power industry chain is undergoing unprecedented transformation. It is projected that by 2025, the elasticity of the chip and AI server businesses will quadruple compared to 2023 levels.

In terms of user experience, AI server design and functionality continue to optimize. For instance, new servers are equipped with intelligent cooling systems that maintain stable operation under high loads, reducing failure rates. This is particularly crucial for industries requiring 24/7 uninterrupted operation, such as financial services, healthcare, and big data analysis. Additionally, users can remotely monitor and manage servers through cloud services, significantly enhancing operational flexibility and overall efficiency.

In the market competition, this AI server undoubtedly occupies an advantageous position. Compared to similar products on the market, it boasts notable advantages in terms of performance and cost-effectiveness. On the one hand, proper cost control allows end-users to enjoy more competitive pricing. On the other hand, its superior performance attracts the attention of large enterprises and research institutions, further boosting its market share.