The rise of AI computing power is not limited to chip leaders! The fund manager that outperforms 99% of peers has placed bets on PCB, packaging substrates, and testing companies with medium and small market capitalization.

According to Zhitong Finance APP, a fund focused on small and medium-sized enterprises in the artificial intelligence (AI) supply chain in Taiwan’s stock market showed itself amid the volatility of global technology stocks last year. By avoiding focused bets on AI giants such as NVIDIA, Taiwan Semiconductor, and Samsung Electronics, and instead shifting to Asian-focused AIs in small and mid-sized computing power supply chains, the fund has achieved exceptional performance.

The Nomura Taiwan High Tech Fund, managed by George Hsieh, has delivered a 164% return over the past 12 months, outperforming 99% of its peers. Even after the outbreak of conflict in Iran, the fund has gained 29% year to date, compared to a 9.5% increase in Taiwan’s benchmark index over the same period.

Hsieh said the fund mitigates risks by investing in different parts of the AI ​​supply chain. According to the fund’s data, nine of the top ten have a market capitalization of less than $25 billion, which covers advanced packaging and chip analysis, printed circuit board (PCB) manufacturing, electronic fabrics and copper foil, and small ABF components. Unlike many emerging market and Asian funds that hold Taiwan Semiconductor—the world’s king of chip foundries’ valued at $1.7 trillion—as their largest position, this semiconductor giant is the fund’s second largest position.

In a recent interview, Hsieh said: “Some companies have near-monopolistic positions in specific areas of AI supply, such as AI servers and high-end AI core components, which allow them to repeatedly capture a large share of the market.” He added that these **** companies “have long anticipated various potential risks.”

As of the end of February, the fund managed assets worth 12.6 billion New Taiwan dollars (about $393 million). Its strong performance shows a clear advantage in avoiding excessive concentration in any type of industrial company. In recent months, factors such as high financing costs, rate pressures, and rising energy costs following the Iran conflict have had a significant impact on betting in the chip manufacturing sector.

Hsieh pointed out that there is a “significant shortage” of capabilities in advanced chip systems and advanced packaging technologies because “to achieve the massive growth required by AI companies makes these technologies very important.”

He believes that the huge demand for memory chips from AI data centers, in turn, has driven growth in other industries that supply components to chip makers, thus encouraging a more comprehensive expansion throughout the AI ​​supply chain.

The fund’s top assets include PCBs and substrates leader ABF Unimicron Technology Corp., the main manufacturer of high-end PCBs and ICs Nan Ya Printed Circuit Board Corp., the world’s leading provider of packaging and testing services Powertech Technology Inc., USB storage control chip and global flash memory solution Corp. Probe card pioneer Chunghwa Precision Test Tech Co.

Hsieh said the fund is adjusting its positions in these companies. If industry demand remains strong and rates become more attractive, he plans to increase operations.

Over the past five years, this equity fund has achieved a cumulative return of 32%, which is better than 94% of peer fund managers.

Hsieh also warned that if the conflict in the Middle East continues for more than three to four months, Taiwan, China may face restrictions on the supply of electricity and raw materials for chemical production, which will suppress the profit opportunities for local technology companies.

However, he remains optimistic about the long-term demand for products from these businesses.

“We believe that once the external environment stabilizes – such as the initiation of peace talks or the reduction of environmental risks – prices that were previously low will rise,” said Hsieh.