We’re hoping the AI trade bottoms this week as we clear a spot of bad economic and trade news, Nvidia earnings and Warsh’s debut Jackson Hole speech on Friday.
Still, there have been bright spots upstream and in optics in Japan.
ABF Substrate
We flagged two weeks ago that ABF Substrate was called out by TSMC at OCP Asia.
Meritz Securities in Korea out with a note on Semco today:
At the recent OCP APAC Summit, TSMC noted that the ABF substrate shortage — driven by larger CoWoS package area and expanding AI demand — is emerging as a key bottleneck in advanced packaging. As CoWoS-based 3DFabric moves toward ever-larger package areas and greater interconnect complexity, the yield impact of small defects and material variation grows accordingly. End customers are also broadening multi-sourcing of ABF substrates to secure supply stability, but differences in substrate characteristics between suppliers have, if anything, increased the burden of yield management and process optimisation on CoWoS. Ultimately, simply diversifying the supplier base will not resolve the ABF shortage, so we expect the value — and the supply-chain bargaining power and pricing leverage — of suppliers capable of stably delivering high-specification ABF substrates to strengthen further.
The die/package area of next-generation AI accelerators — including NVIDIA’s Feynman, slated for launch in 2028 — is expected to expand roughly 3–5x versus 2026. On a simple calculation, this means that even if AI system demand comes in at only half of current expectations, ABF substrate demand on an area basis could still grow 1.5–2x versus 2026.
So why did ABF names trade down after OCP Asia and rebound today?