Key Takeaways:
- TSMC holds 60% of the global chip market and 90% of advanced chip production.
- TSMC’s 3-, 5-, and 7-nanometer chips are vital for AI technologies.
- $30-$32 billion in 2024 capital spending focuses on AI.
- TSMC reported $20.58 billion in Q2 2024 revenue, up 33.3% year-over-year.
- Predictive AI market projected to grow from $14.9 billion (2023) to $108 billion (2033).
Taiwan Semiconductor Manufacturing Company Limited (TSMC) has established itself as a key player in the AI sector, leveraging its dominant position in the semiconductor industry.
As the world’s largest contract chip manufacturer, TSMC produces critical healthcare, communications, and artificial intelligence (AI) components. It holds a 60% share of the total chip market and 90% of the advanced chip manufacturing industry, cementing its role in advancing AI technologies.
Key Drivers Behind TSMC’s AI Growth
The growing importance of generative AI (e.g., ChatGPT-4) and predictive AI in fields like fraud detection and market analysis has heightened the demand for advanced semiconductors. TSMC’s chips are vital to these AI developments, ensuring continued relevance and growth.
Mature organizations benefit from predictive AI by achieving high returns and enhancing customer experiences. For example, UPS saves $35 million annually by optimizing delivery planning.
A Medium-sized bank could save $16 million by predicting fraud, and marketing campaigns can increase profits fivefold by forecasting consumer behavior.
Last year, spending on generative AI (GenAI) was less than 7% of what was spent on predictive AI, though predictive AI remains underutilized due to operational challenges.
$TSM TSMC Q2 FY24:
• Revenue +40% Y/Y $20.8B ($0.7B beat).
• Gross margin 53% (-1pp Y/Y).
• Operating margin 43% (+1pp Y/Y).
• Capex $6.3B.
• EPADR $1.48 ($0.06 beat).3nm & 5nm were 15% & 35% of revenue. pic.twitter.com/jHB5tEHGki
— App Economy Insights (@EconomyApp) July 18, 2024
Unlike GenAI, which often requires human oversight, predictive AI can function autonomously, making it more cost-effective and requiring less infrastructure.
The global predictive AI market is projected to grow from $14.9 billion in 2023 to $108 billion by 2033, with a compound annual growth rate (CAGR) of 21.9% from 2024 to 2033, according to a report by market.us.
TSMC remains a popular stock among institutional investors, with 156 hedge funds holding positions. Fisher Asset Management, for example, maintains a $4.94 billion stake. TSMC’s one-year performance as of September 9 was 75.02% growth. But in the last month the stock has fallen 6.16%.
Comment
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TSMC’s technological leadership and commitment to shareholder returns make it attractive for investors seeking exposure to the AI boom.
As AI adoption accelerates, TSMC’s semiconductor technology leadership and extensive investments in AI infrastructure position the company for continued success.
In summary, TSMC’s advanced chip technologies, strategic investments, and strong financials make it a top contender for investors looking to capitalize on AI’s rapid growth.
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