Victory Giant tops Asian stocks with 600% surge on Nvidia partnership

It stands out against other top stock performers that underscore the divide between US attempts to onshore tech production on one side, and China's push to bolster self reliance on the other side

By Sangmi Cha

 

While clashes between the US and China over tariffs and trade restrictions have been a dominant theme in the technology world, this year’s hottest Asian stock demonstrates how the nations still rely on each other.

 

Shares of Victory Giant Technology (Huizhou) Co. are up nearly 600 per cent so far this year, topping MSCI Asia Pacific Index, lifted by ties to its key customer Nvidia Corp. The Chinese maker of printed circuit boards is seen as having a niche in artificial intelligence applications, and the ability to rapidly meet customer needs.

 

It stands out against other recent top stock performers that underscore the divide between US attempts to onshore tech production on one side, and China’s push to bolster self reliance on the other.

 

“Victory Giant Technology’s recent surge highlights how critical US-China relations remain to the global tech ecosystem,” said Gerald Gan, deputy chief investment officer at Reed Capital Partners. “While both sides continue to compete in advanced chip development, the reliance on Chinese manufacturers for essential hardware components shows that full separation is impractical in the near term.” 

 

Last week’s high-level talks left uncertainty over the prospects for sale of Nvidia chips in China — related negative sentiment dragged down Victory Giant’s stock 13 per cent over the past two sessions. But it’s clear that the US chipmaker still relies on the China supply chain hailed as a “miracle” by its Chief Executive Officer Jensen Huang.

 

At any rate, there’s little doubt that the world’s hyperscalers will continue to spend massively to build out their AI services. Nvidia will continue to benefit from this, along with its suppliers.

 

Pick-and-Shovel 

So-called “pick-and-shovel” companies with dominant positions have been reaping the big rewards from investors, such as leading AI chip foundry Taiwan Semiconductor Manufacturing Co. whose market value climbed above $1 trillion for the first time this year. 

 

Victory Giant’s meteoric rise has brought an eightfold gain in its market capitalization since early January to recent levels over $40 billion. The firm is seen as a leader in high-density interconnect and multi-layer PCBs that are crucial for AI chips.

 

Keeping up with voracious customer demand has been difficult for some suppliers such as SK Hynix Inc., which said Wednesday that it has already sold out its memory chip stock for next year. Victory Giant hasn’t had such problems.

 

The Huizhou-based company has “the ability to scale up very quickly and is willing to invest in the capacity, which is very important criteria for Nvidia or buyers allocating their orders,” said Victoria Mio, head of Greater China equities at Janus Henderson in Singapore.

 

Founded in 2006, Victory Giant has traded on the Shenzhen Stock Exchange for a little more than a decade. Its plans to raise about $1 billion in a Hong Kong listing have been a tailwind in the past few months, along with its strong AI-driven results.

 

The company’s third-quarter net income surged 260 per cent from a year earlier, as its sales jumped 79 per cent to over 5 billion yuan ($715 million).

 

Secondary Beneficiary 

While there were over 2,000 PCB manufacturers globally as of last year, Victory emerged as top in sales for AI and high-performance computing earlier this year, according to Sumeet Singh, head of equity research at Aequitas Research Pvt. The company gets about 60 per cent of sales abroad, probably all from Nvidia given Victory’s high-end expertise, he said.

 

Despite the huge gain in its share price, Victory Giant is trading at 32 times estimated earnings for the next 12 months, far below levels over 100 times for Chinese chipmakers Semiconductor Manufacturing International Corp. and Cambricon Technologies Corp. It’s roughly even with Nvidia’s valuation. 

 

The street sees further upside, with the 16 analysts that cover Victory Giant unanimously rating it a buy. The consensus price target calls for a further 16 per cent rise over the next year.

 

The ongoing rally in major AI plays has been met with concerns of concentration in just a handful of stocks. John Lin, chief investment officer of emerging markets value equities and China equities at AllianceBernstein, said he seeks instead to gain AI exposure through “secondary or back-end beneficiaries”.

 

“PCB makers are great examples of that approach,” said Lin, whose China A-share equity portfolio lists Victory Giant as its top holding. “A PCB maker plays a critical role in enabling high-performance computing systems — after all, even the best chips in the world can’t function without a high-quality, precisely engineered board to sit on.”