Jefferies
has
identified
a
lesser-known
and
potentially
undervalued
Taiwanese
company
poised
to
benefit
from
the
growing
artificial
intelligence
sector.
The
investment
bank
said
Insyde
Software,
listed
on
the
Taipei
Exchange,
is
well
positioned
to
capitalize
on
the
increasing
demand
for
AI-enabled
personal
computers
and
servers.
Investors
are
typically
able
to
trade
the
Taiwan-listed
stocks
through
international
brokers,
such
as
Interactive
Brokers.
Jefferies
initiated
coverage
of
Insyde
with
a
research
note
titled
“Firmware
Leader
and
Yet-to-be
Discovered
AI
Play”
on
July
9
with
a
“Buy”
rating
and
a
price
target
that
suggests
a
potential
42%
upside
from
current
levels.
However,
the
stock
has
already
risen
by
more
than
30%
since
the
ratings
action,
according
to
FactSet
data,
which
shows
the
stock
currently
offers
17%
upside
potential.
The
stock
has
risen
by
101%
in
2024,
and
is
up
by
more
than
1,500%
over
the
past
five
years,
FactSet
data
indicates.
Founded
in
1998,
Insyde
has
established
itself
in
the
firmware
industry,
commanding
over
50%
market
share
in
the
personal
computer
segment,
Jefferies
suggests.
Firmware
is
software
embedded
in
hardware,
which
enables
higher-level
software
—
such
as
operating
systems
like
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
legacy
Basic
Input/Output
System
(BIOS)
systems.
The
company’s
“tight
partnerships
with
top
chip
designers”
such
as
Nvidia,
Arm,
Qualcomm,
Intel,
and
Taiwan-headquartered
ASPEED,
as
well
as
prominent
original
equipment
manufacturers
like
Dell
and
HP,
have
also
helped
it
succeed,
according
to
Jefferies.
“Amid
rising
AI
PC/
servers
globally,
Insyde
is
well-positioned
to
capture
the
significant
AI
tailwind,
driving
20%
[compounded
annual
sales
growth
estimate
until
2030],”
said
Jefferies
analysts
led
by
Matt
Ma
in
a
note
to
clients
on
July
9.
However,
Jefferies
added
that,
despite
the
company’s
long
history
in
technology
and
several
partnerships,
the
stock’s
“limited
sell-side
coverage
likely
means
the
stock
has
yet
to
be
discovered.”
The
investment
bank
expects
the
personal
computer
BIOS
sector
as
a
whole
to
grow
at
a
14%
compound
annual
growth
rate
from
2023
to
2030.
The
bank’s
analysts
also
hold
that
Insyde’s
royalty-based
business
model
is
another
factor
contributing
to
its
appeal.
The
company
charges
a
fee
for
each
device
using
its
firmware,
creating
significant
economies
of
scale
as
client
shipments
increase.
This
model
has
allowed
Insyde
to
maintain
gross
margins
above
70%
and
steadily
improve
net
margins,
as
shown
by
the
company’s
earnings
over
the
past
decade.
—
CNBC’s
Michael
Bloom
contributed
reporting.
