TSMC's All Aboard The AI Gravy Train

TSMC's All Aboard The AI Gravy Train
Daniel Johnston

8 months ago2 mins

Mentioned in story

What’s going on here?

TSMC, the world’s biggest contract chipmaker, chugged its way to success on the AI gravy train.

What does this mean?

The global chip market might be going through a rough patch, but TSMC has found a silver lining in the form of artificial intelligence. You see, the firm is the go-to manufacturer for Nvidia’s “AI accelerator” chips – the crème de la crème hardware used to train computer models that power high-flown projects like ChatGPT. That booming industry has triggered a surge in demand for AI chips, helping TSMC offset some of the slowdown in sectors like the smartphone market. So while last quarter’s revenue took a 10% dip from the same time last year, it still managed to outdo estimates, according to Bloomberg’s calculations.

Why should I care?

For markets: Stocking up.

TSMC has already predicted a dip in its revenue this year, but investors aren’t spooked: in fact, they’ve sent its stock up by over 25%. See, they’re playing the long game – and they’ve taken TSMC’s advanced manufacturing prowess and its plans to boost its advanced chip packaging capacity as signs that it’s a “key enabler of AI”. Goldman Sachs seems to agree, setting a price target 24% higher than current levels. And it’s not alone: Bloomberg data shows that 97% of analysts covering the stock have given it a buy recommendation rating.

TSMC stock
Source: Google Finance

The bigger picture: Mr. Worldwide.

TSMC’s based in disputed territory – Taiwan – so even though the firm is Asia’s most valuable listed company, its investors aren’t necessarily sleeping soundly. Still, TSMC’s taking some steps to address those worries: sure, it’s keeping its most advanced manufacturing at home, but in the past couple of years it’s been expanding production everywhere from the US to Japan and Europe. And that kind of global footprint just might let TSMC cement its dominance in the chip sector.

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