15 January 2025
Dear Fintax Investor
Artificial intelligence (AI) is taking centre stage in both popular culture and the financial markets, and it’s no surprise why. As AI continues to reshape industries, it’s not just the software companies driving this revolution; hardware manufacturers—especially those producing the semiconductors powering AI—are also major beneficiaries. While Nvidia is often the most recognized name in this space, there are other, less obvious players who stand to gain significantly. One such opportunity is Samsung Electronics, a global tech giant valued at USD 240 billion—significantly lower than Nvidia’s market capitalization of USD 3.4 trillion—yet with a compelling position in the AI-driven semiconductor market.
The Fintax Intl. Funds have strategically initiated a position in South Korea, with Samsung Electronics at the heart of this investment. Samsung is the largest company on the Korean stock market, representing over 24% of the country’s index. Its journey, which began in 1938 as a diversified company involved in food processing and textiles, has evolved into a global leader in semiconductors, mobile devices, and consumer electronics. Since entering the semiconductor market in the 1980s, Samsung has become a dominant force in memory chips and processors.
With the rise of AI, Samsung has several distinct competitive advantages that set it apart. Its vertical integration enables it to use its own advanced chips across a range of products—from smartphones and TVs to IoT devices like refrigerators and vacuum cleaners. Additionally, Samsung’s leadership in memory chips, which are crucial for AI applications, positions it strongly for future growth. Remarkably, despite these advantages, Samsung is currently one of the most undervalued AI-related companies, trading at a price-to-earnings (P/E) ratio of just 11.3x. In comparison, Nvidia currently trades at 53x, TSMC at 38x, and Broadcom at a staggering 180x. This presents a unique opportunity to invest in a market leader at a significantly more attractive valuation, making Samsung an appealing addition to the portfolios as we continue to position for the future of AI.