Ignore Nvidia!
Watch the companies nobody is watching
It’s a long way to the top (if you wanna rock and roll!)
Don’t worry about NVIDIA being down overnight.
If anything, I think the more important signal is coming from a company most investors have probably never heard of.
Nippon Chemical Industrial (4092 JP).
Something big is happening underneath the AI trade. And we can see it in traditionally conservative companies quietly adding capacity.
The signal I care about
The market is focused on the obvious names.
SK Hynix is expanding.
Nanya is expanding.
Everyone is watching HBM, GPUs and memory capacity.
But there’s another way to think about the cycle: What are conservative companies doing?
Because a specialty-chemical company doesn’t build expensive new capacity because AI is fashionable. It builds when management believes demand will be durable enough to justify the investment.
And yesterday, Nippon Chemical Industrial announced plans to increase its high-purity red phosphorus capacity by approximately 60%, with the new capacity expected to come online in FY2027.
That’s interesting on its own. But the history makes it much more interesting.
Nippon Chemical Industries has already expanded substantially
Nippon Chemical Industries had already increased high-purity red-phosphorus capacity to roughly 2.5× its 2019 level.
And as recently as 2025, management was still taking a cautious approach to further expansion, essentially saying it would assess demand and profitability before committing additional capital.
Now?
Another 60%.
That’s a very different level of confidence.
High-purity red phosphorus is used in semiconductor and compound-semiconductor applications, including InP materials used in optical communications. And optical communications are becoming increasingly important as AI data centers require enormous amounts of high-speed connectivity.
So, this isn’t simply another company attaching itself to the AI narrative. They’re building physical capacity into the AI infrastructure supply chain.
This is why Nippon Chemical Industries matters
I’m not saying SK Hynix or Nanya are not worth watching. Their capacity plans are important. But they’re also the obvious companies everyone is paying attention to.
Nippon Chemical Industries gives us a different signal. A historically conservative supplier is looking several years ahead and deciding that it needs 60% more capacity.
That tells me something about what management is seeing from its customers. And this is exactly the kind of signal that can be missed when everyone is staring at NVIDIA’s stock price.
Don’t confuse stock volatility with cycle duration
NVIDIA can fall 3% overnight. The Nasdaq can fall. Semiconductors can have a bad day.
None of that changes the fact that companies deep in the supply chain are still committing capital to expand the physical infrastructure required to support AI.
NVDA tells us what investors think about AI today.
Nippon Chemical Industries may be telling us what a conservative supplier believes AI demand will look like several years from now. And if that signal is right, the biggest risk isn’t that we’ve missed the end of the AI cycle.
It may be that we’re still underestimating how long it has to run. Long live AC/DC.
Best regards
Mateen