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@kfarah9

STOCKS: INVESTING. TRADING. DIVIDENDS. OPTIONS. Trading full time since 1998. Share trades, strategies, lessons learned. Not investment advice.

Joined September 2012

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kfarah9 retweeted

Ricardo

@Ric_RTP

about 5 hours ago

This 117-year-old Japanese food company controls whether Nvidia can build another chip. It has never made a wafer, a transistor, or a single piece of equipment. Here's what they do and what just happened: Ajinomoto commercialized monosodium glutamate in 1909. It's the seasoning in your instant ramen. And somewhere in the 1990s its chemists worked out that a byproduct of that process made an almost perfect insulating film. They called it Ajinomoto Build-up Film. The industry calls it ABF. It's the layer inside the substrate that sits directly under a high-end chip. Nvidia's accelerators need it. Intel's processors need it. The advanced packaging TSMC does needs it. And Ajinomoto holds roughly 95% of the world market for it. They've held that share for about 30 years. Now here's what makes this absurd: ABF is around 0.5% of what a high-end chip costs to make. Half of one percent. But NOTHING ships without it, because the tolerance for failure is zero and qualifying a different supplier takes 2 to 3 years of testing. So a food company ended up holding the smallest and cheapest part of the most expensive supply chain on Earth. For decades they barely priced it that way but then somebody noticed... In March a British activist fund called Palliser Capital disclosed a top 25 stake in Ajinomoto and said publicly that the company had underpriced ABF for years and should raise it by more than 30%. Two months later Ajinomoto told substrate makers the price was going up about 30%. That increase took effect this quarter. And Palliser wants more than the price. It wants the electronics business carved out of the food conglomerate entirely, because the market has been valuing a monopoly on AI infrastructure as though it were a seasoning line. Then in early August it got more interesting: Ajinomoto reportedly told its customers in mainland China it was cutting their ABF supply by 30%. China's domestic substitute covers under 5% of what the country needs. Ajinomoto hasn't confirmed that cut and the reporting comes from Chinese trade press. But nobody has denied it either. And the squeeze is already showing up in actual hardware. ABF lines have run above 95% utilization since the start of the year. Lead times went from 12 weeks in mid-2025 to 26 weeks now. One contract manufacturer in Singapore cut its AI accelerator builds by 37% in a single quarter because it couldn't get substrate. Goldman Sachs has the supply gap widening from roughly 10% today to 21% next year and 42% by 2028. But there are escape routes too: Samsung Electro-Mechanics is spending $1.2 billion building its own lines and won't have volume until late 2027. Ajinomoto's third plant doesn't produce until 2032. And in April a Chinese MSG producer called Lotus Holdings paid roughly $15 million for control of a Shenzhen ABF startup with under $1 million in annual revenue. So one seasoning company is now trying to break another seasoning company's grip on AI. The counter-case is fair though: It's half a percent of a chip, everyone is expanding, and Samsung or Sekisui probably cracks it before the decade is out. Ajinomoto going underpaid for 30 years is an argument FOR the hike. But that's a 2029 answer to a 2026 problem. Trillions of dollars of AI spending now runs through one Japanese factory that grew out of soup stock, and that factory has just learned what it's actually worth. Ajinomoto spent 30 years being too polite to charge for it. A hedge fund talked them out of that in a few weeks.

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