AI Materials Supercycle Set to Persist Through 2028

A new supercycle has begun in AI upstream materials, according to Morgan Stanley's latest research report. The firm warns that supply-demand gaps in three key categories, high-end glass fiber cloth, copper foil, and optical fiber, will persist through 2028.

The global PCB market is expected to grow at an 18% compound annual rate over five years, while AI-related copper clad laminate growth reaches as high as 47%. High-end glass fiber cloth faces a 40% supply gap in 2026, copper foil is projected to see a 31% shortfall in 2027, and optical fiber demand is expected to surge 69% year-over-year in 2026.

Japanese companies have long dominated the high-end materials market, but domestic Chinese substitution is accelerating. Copper foil maker Co-Tech Development (8358.TW) was singled out by Morgan Stanley, which forecasts EPS of NT$18.6 and NT$31.6 over the next two years, with a target price of NT$730.

The supply-side constraints, equipment, technical certification, and capacity ramp-up, make it difficult to release new supply in the short term, creating persistent shortages. Suppliers that possess the advantages of qualification for new product verification, stable mass-production yields, and secure upstream raw material supply will benefit most from this cycle.