AI server demand is becoming the main theme in APAC technology hardware, but certainty varies across companies

Overview

This report is J.P. Morgan’s APAC Technology Specialist Sales commentary, centered on AI server demand across the Japanese technology hardware and semiconductor supply chain. It focuses on Taiyo Yuden’s high-growth guidance in AI server MLCC applications, Kioxia’s credit rating upgrade and potential shareholder returns, market expectations for Nittobo’s T-glass pricing and capacity expansion, and the potentially optimistic FY26 sales assumptions in Nippon Chemi-Con’s medium-term plan.

Core views

The core view is that AI server demand remains the most important incremental source for APAC technology hardware, driving demand for MLCCs, silicon capacitors, tantalum capacitors, substrate materials, storage, and related equipment; however, the quality of benefits and valuation support differ across companies. Taiyo Yuden benefits from growth in AI server power-related MLCCs, Kioxia benefits from improving free cash flow and expectations for shareholder returns, and Nittobo benefits from expectations for ABF customer capacity expansion and material tightness; by contrast, although Nippon Chemi-Con has an AI-related growth story, J.P. Morgan believes its FY26 sales plan carries downside risk.

Analysis framework

The report adopts a sales commentary and meeting-notes style of analysis, combining management guidance, investor focus points, ratings/target prices, industry news flow, and upcoming corporate events to assess the marginal impact of the AI server theme on Japanese and APAC technology hardware companies.

Methodology notes

• Fundamental trackingManagement guidance and investor Q&A

  Observe expectations for demand, capacity, pricing, and capital returns through company meetings, IR Days, and sell-side meetings.

  Taiyo Yuden’s FY26-FY27 AI server application CAGR, Kioxia’s shareholder return discussion, and Nittobo’s T-glass pricing and expansion plans all come from management communication or investor focus points.

• Supply chain mappingAI server hardware demand transmission

  AI server demand spreads from GPUs/accelerator cards to MLCCs, capacitors, substrate materials, storage, and equipment.

  The report compares Taiyo Yuden’s MLCC opportunity with peers such as Murata, TDK, SEMCO, and YAGEO, and links Nittobo to ABF customer expansion and the Ushio lithography equipment supply chain.

• Risk identificationGuidance credibility and downside risk assessment

  High-growth guidance needs to be validated against capacity utilization, pricing changes, raw material costs, and end-demand.

  The report explicitly notes that Nippon Chemi-Con’s FY26 sales plan may be overly optimistic, while also indicating that whether Taiyo Yuden can raise prices in the future depends on whether capacity reaches full utilization around FY27.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Taiyo Yuden

  A core beneficiary of AI server MLCC and power applications

  Strengths

  Management guides for approximately 80% CAGR in AI server applications in FY26-FY27, capacity utilization is around 95%, FY26 price declines are expected to be relatively mild, and raw material costs such as silver and copper can be passed through downstream.

  Weaknesses

  Some MLCCs may be replaced by silicon capacitors or face competition from Murata, SEMCO, and others; if demand or full-capacity utilization falls short of expectations, pricing upside will be limited.

  Comparison

  Japanese investors typically view Murata as the leader in this space, with TDK second in quality; SEMCO has also entered a similar MLCC AI server power niche.

  Risks

  Slower AI server demand, greater-than-expected MLCC price declines, insufficient raw material cost pass-through, and intensified competition.

• Kioxia

  A beneficiary of improving storage-cycle conditions and shareholder return expectations

  Strengths

  S&P upgraded it to investment grade with a stable outlook, and expanding free cash flow may drive market expectations for the company to return to a net cash position.

  Weaknesses

  The form of shareholder returns still awaits management confirmation, and current communication leans more toward cash dividends than buybacks.

  Comparison

  Compared with other storage companies, investor focus on Kioxia is currently more concentrated on its credit rating, free cash flow, and capital returns.

  Risks

  A reversal in the NAND cycle, free cash flow missing expectations, and shareholder returns falling short of market expectations.

• Nittobo

  A beneficiary of the T-glass and ABF substrate material chain

  Strengths

  Higher ASPs from ABF customers and capacity expansion support market optimism on T-glass demand, while expansion plans may strengthen its long-term supply position.

  Weaknesses

  It reportedly paused further T-glass price hikes, suggesting that the near-term pricing pace may be less aggressive than the market expected.

  Comparison

  The report notes that resilient ASP increases and expansion by ABF customers also benefit key capital equipment supplier Ushio in lithography tools.

  Risks

  Failure to raise prices, execution risk in capacity expansion, customer demand volatility, and uncertainty around cost-sharing mechanisms.

• Nippon Chemi-Con

  A cautious name within the AI server capacitor growth theme

  Strengths

  The company plans to expand aluminum electrolytic capacitors for AI servers, improve profitability, and increase hybrid capacitor capacity by about 20% annually.

  Weaknesses

  J.P. Morgan believes the FY26 sales plan is overly optimistic, with downside risk remaining even after considering AI-related growth expectations.

  Comparison

  Compared with Taiyo Yuden’s MLCC opportunity, the investment case for Nippon Chemi-Con relies more on delivery of the medium-term plan and earnings improvement.

  Risks

  FY26 sales missing expectations, lower-than-expected conversion of AI-related orders, and capacity expansion failing to improve margins.

• Oracle Japan

  A Japanese software/cloud services shareholder return theme

  Strengths

  The report expects a special dividend of Y820 in FY5/27 and forecasts the ordinary payout ratio to rise from about 40% to 100% starting FY5/28.

  Weaknesses

  The investment thesis comes more from capital return adjustments than from incremental growth in the AI hardware supply chain that is the report’s main focus.

  Comparison

  Compared with the hardware chain, Oracle Japan is the software and shareholder-return case in this commentary.

  Risks

  Dividend policy falling short of expectations, downward earnings revisions, and weaker-than-expected software demand or cloud business growth.

• TDK / YAGEO / Murata / SEMCO / Ushio

  Comparable and read-through names in the AI server hardware chain

  Strengths

  TDK and YAGEO may benefit from AI server capacitor demand, Murata is viewed as the MLCC industry benchmark, SEMCO has entered related niches, and Ushio benefits from equipment demand tied to ABF expansion.

  Weaknesses

  The report does not provide detailed earnings forecasts or rating changes for these companies.

  Comparison

  These companies mainly serve as references or read-through names for supply chain judgments related to Taiyo Yuden and Nittobo.

  Risks

  Peer competition, technology substitution, volatility in AI server capital expenditures, and changes in customer expansion pace.

Key data

• Taiyo Yuden AI server application growthApproximately 80% CAGR in FY26-FY27Guidance provided by management at a sell-side meeting; the FY25 base contribution of this business was 9%.
• Taiyo Yuden capacity utilizationApproximately 95%Management indicated that if operations approach full utilization by FY27, it will reconsider price hikes.
• Taiyo Yuden rating and target priceOW, target price Y9,500Rating information for a key company in the report.
• Nippon Chemi-Con rating and target priceUW, target price Y1,260J.P. Morgan maintains a cautious view, believing the FY26 sales plan is overly optimistic.
• Nippon Chemi-Con long-term growth assumptionOn-board long-L products CAGR of approximately 94% through 2030The company plans to expand aluminum electrolytic capacitors for AI servers and improve profitability, but the report flags downside risk.
• Oracle Japan shareholder return assumptionSpecial dividend of Y820 in FY5/27, with the ordinary payout ratio rising from about 40% to 100% starting FY5/28J.P. Morgan made slight forecast adjustments based on recent results.
• Kioxia credit rating eventUpgraded by S&P to investment grade with a stable outlookThe next focus is the June 2, 2026 IR Day, along with cash dividends, buybacks, and the path back to a net cash position.
• Nittobo pricing dynamicsReportedly paused further T-glass price hikes, but retained the possibility of price increases or cost-sharing mechanismsThe market remains focused on its capacity expansion and strong ASP increases from ABF customers.

Impact & implications

For portfolios, the AI server theme can still support relative performance in the Japanese and APAC hardware chain, but investors need to distinguish between companies directly benefiting from high-end MLCCs, substrate materials, and improving storage cash flow, and those relying only on long-dated high-growth guidance while near-term sales plans may be overly aggressive. The report carries a marginally positive implication for the chains related to Taiyo Yuden, Kioxia, and Nittobo, while emphasizing estimate risk for Nippon Chemi-Con.

Risks

• AI server demand growth may fall short of expectations, weakening demand transmission for MLCCs, capacitors, substrate materials, and storage.
• High-growth guidance from management for FY26-FY27 or through 2030 carries execution risk.
• MLCC price declines, a pause in T-glass price hikes, or insufficient cost-sharing may compress earnings leverage.
• If rising raw material prices such as silver and copper cannot be passed through smoothly, it will affect margins for component companies such as Taiyo Yuden.
• Semiconductor geopolitics, export controls, smuggling investigations, and Chinese AI chip competition may alter supply chain expectations.
• If Nippon Chemi-Con’s FY26 sales plan proves too optimistic, it may lead to valuation and earnings forecast downgrades.

What to watch

• Management commentary at Kioxia’s June 2, 2026 IR Day regarding shareholder returns, cash dividends, buybacks, and the path to net cash.
• Whether Taiyo Yuden’s FY26-FY27 AI server MLCC demand materializes and whether capacity utilization rises from 95% toward full utilization.
• Whether MLCC prices decline only mildly in FY26 and whether silver and copper costs can be passed on to customers.
• Whether Nittobo resumes T-glass price hikes or introduces a cost-sharing mechanism, and the pace of its capacity expansion plans.
• Whether ABF substrate ASPs continue to rise and whether customer expansion continues to support related chains such as Nittobo and Ushio.
• Whether AI server capacitor demand, hybrid capacitor capacity expansion, and profitability improvement in Nippon Chemi-Con’s medium-term plan can be delivered.
• The global semiconductor news flow, including AMD investment in Taiwan, changes in Nvidia’s China AI chip market, YMTC IPO preparations, and Alibaba AI chip and model updates.