Nvidia Supplier Taiwan Semi's Global Expansion and AI Revenue Growth in Focus Despite Overbought Signals
Portfolio Pulse from Anusuya Lahiri
Taiwan Semiconductor Manufacturing Co (TSM) has seen its shares soar over 110% since October 2022, largely due to the AI boom and its role as a key supplier to Nvidia Corp (NVDA). Despite AI contributing only 6% to TSMC's total revenue in 2023, the company expects AI revenue to grow at an annual rate of 50%, aiming for it to represent a high-teen percentage of total revenue by 2027. TSMC is expanding globally, with new plants in the US, Japan, and Germany, to meet demand from tech giants like Amazon.com Inc (AMZN) and Microsoft Corp (MSFT). Apple Inc (AAPL) is also developing processors using TSMC's 2-nanometer fabrication process. However, overbought signals and geopolitical tensions pose risks. TSMC and Samsung Electronics Co (SSNLF) are set to receive significant funds from the US under the 2022 Chips and Science Act. Investors can gain exposure to TSMC through the VanEck Semiconductor ETF (SMH) and iShares Semiconductor ETF (SOXX). TSM shares traded lower by 2.16% to $136.60 premarket.
March 15, 2024 | 12:44 pm
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NEUTRAL IMPACT
Nvidia's gains mirror TSMC's, buoyed by the AI boom, but concerns over TSMC's valuation and AI demand sustainability could impact Nvidia.
Nvidia's close relationship with TSMC means TSMC's performance and the AI market's sustainability are crucial for Nvidia's stock.
CONFIDENCE 80
IMPORTANCE 75
RELEVANCE 80
NEUTRAL IMPACT
VanEck Semiconductor ETF offers exposure to TSMC, and its performance is closely tied to TSMC's fortunes and the broader semiconductor industry.
As TSMC is a significant component of SMH, TSMC's performance directly impacts SMH's value, making it a proxy for TSMC's and the semiconductor industry's health.
CONFIDENCE 75
IMPORTANCE 60
RELEVANCE 70
NEUTRAL IMPACT
iShares Semiconductor ETF, like SMH, provides investment exposure to TSMC, reflecting the semiconductor industry's trends and TSMC's performance.
SOXX, by including TSMC, is influenced by TSMC's stock movements and the semiconductor market's overall health, making it a key asset for investors seeking exposure to this sector.
CONFIDENCE 75
IMPORTANCE 60
RELEVANCE 70
NEUTRAL IMPACT
TSMC's stock has soared due to the AI boom and its global expansion plans, despite concerns over its valuation and geopolitical tensions.
TSMC's significant growth and expansion plans are positive, but overbought signals and geopolitical tensions could impact its short-term stock performance.
CONFIDENCE 85
IMPORTANCE 90
RELEVANCE 100