Jefferies has identified a little-known and potentially undervalued Taiwanese company poised to benefit from the growing artificial intelligence industry. The investment bank said Insyde Software, which is listed on the Taipei Stock Exchange, is well-positioned to capitalize on growing demand for artificial intelligence PCs and servers. Investors can usually trade Taiwan-listed stocks through international brokers such as Interactive Brokers. Jefferies released a research report titled “Firmware Leaders and Undiscovered Artificial Intelligence Games” on July 9, reporting on Insyde for the first time, giving a “buy” rating and a target price that may rise from current levels. 42%. However, the stock has gained more than 30% since the rating action, showing the stock now has 17% upside potential, according to FactSet data. The stock is up 101% in 2024 and more than 1,500% over the past five years, according to FactSet data. Jefferies said that Insyde was founded in 1998 and has established itself in the firmware industry, accounting for more than 50% of the market share in the personal computer field. Firmware is software embedded in hardware that enables higher-level software (such as operating systems such as Microsoft Windows or Linux) to operate with hardware components. Insyde’s success stems from its early adoption of Unified Extensible Firmware Interface (UEFI) technology, which has largely replaced traditional Basic Input/Output System (BIOS) systems. Jefferies said the company’s success has also been aided by its close relationships with top chip designers such as Nvidia, Arm, Qualcomm, Intel and Taiwan-based ASPEED, as well as prominent OEMs such as Dell and HP. Jefferies analysts led by Matt Ma said in a report to clients on July 9: “Insyde is well-positioned to capture the huge driving force of artificial intelligence against the backdrop of global artificial intelligence PC/server growth. Driving 20% growth (expected compound annual sales growth through 2030).” However, Jefferies added that despite the company’s long history in technology and multiple partners, the stock has “limited sell-sides. Coverage may mean the stock has not yet been discovered”. The investment bank predicts that the entire PC BIOS industry will grow at a compound annual growth rate of 14% from 2023 to 2030. Another factor. The company charges a fee for each device that uses its firmware, creating significant economies of scale as customer shipments increase. This model allows Yingside’s gross profit margin to remain above 70% and its net profit margin to increase steadily, as can be seen from the company’s profits in the past ten years. —CNBC’s Michael Bloom contributed reporting.
