Apple suppliers, metaverse and more: JPMorgan names its top Asian tech stocks to buy

Published Tue, Feb 1 20226:47 PM ESTUpdated Tue, Feb 1 20228:32 PM EST

JPMorgan has named its top technology stock picks as it urges investors to be "selective" within the Asian tech sector. The sector had recorded earnings per share growth of more than 50% annually in 2020 and 2021, but JPMorgan analysts, led by Gokul Hariharan, now see that growth "decelerating" into the second half of 2022. The bank still forecasts 11% EPS growth for the sector this year. EPS, or earnings per share, is an important metric used by traders to gauge the value of a stock or index. Hariharan advised investors to focus on recovery plays, such as data centers, selective parts of the Apple supply chain, memory semiconductors and substrates — sub-sectors which the bank says can drive sustainable EPS revisions. JPMorgan believes China data centers could see a "fledging" recovery, led by strong retail momentum amid continued growth in data traffic, secular China cloud demand and continued digital transformation trends. The industry could also see increased consolidation that will benefit larger players, Hariharan said. The bank's top pick in this space is internet services provider Beijing Sinnet Technology for its power usage effectiveness and superior locations around China's tier-1 cities. JPMorgan's basket of iPhone supply chain winners includes Chinese contract manufacturer Luxshare Precision for its market share momentum, Taiwanese optical lens product manufacturer Genius Electronics and Japanese car navigation systems maker Alps Alpine for its sustained strong share gains in camera actuators, Hariharan said. In addition, the bank sees the memory semiconductor market growing 9% to reach $165 billion this year. Within this space, the bank likes SK Hynix for its increasing earnings visibility and its acquisition of Intel's NAND business. The bank also likes Samsung Electronics for its "dominant" market position and new growth products, as well as its "sizeable" M & A potential. Meanwhile, the bank outlined several investment themes that it thinks will be defining for the Asian tech sector in the year ahead. This includes the rising adoption of electric vehicles as the chip shortage eases, which could benefit the EV supply chain, Hariharan said. JPMorgan expects global EV penetration to reach 12.2% this year compared to just 8% in 2021. It likes Samsung SDI for its growing auto cylindrical battery and solid-state battery focus, Delta Electronics for its strong growth in EV charging products for U.S. and European automakers, as well as Nidec and Renesas Electronics for their M & A growth potential. The bank expects the global virtual reality (VR) market to have a "breakthrough" year in 2022, amid new launches from Meta , Sony , and Apple . The bank has forecast the VR and augmented reality (AR) market to grow at a compounded rate of 36% and 128% into 2025, Hariharan said. Its top picks are Genius for its robust lens content growth and solid market share, Sony for its games and music content for VR as well as its tie-ups with Metaverse-related companies. South Korea's LG Innotek also makes the JPMorgan list for its 3D sensing camera modules opportunities.

A JPMorgan logo displayed on a smartphone.

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JPMorgan has named its top technology stock picks as it urges investors to be "selective" within the Asian tech sector.