Pay More for Chips Made Outside Taiwan as AI Demand Soars and Global Expansion Continues: Taiwan Semiconductor
Portfolio Pulse from Anusuya Lahiri
Taiwan Semiconductor Manufacturing Co (TSM) is introducing a pricing premium for chips made outside Taiwan, driven by the need to expand globally amid tensions with China and rising costs. This strategy, highlighted by CEO CC Wei, aims to cover increased operational expenses in various locations and aligns with efforts to reduce semiconductor supply reliance on Taiwan. TSM, a key supplier to Nvidia Corp (NVDA), reported strong Q1 net profit and revenue growth expectations from AI chip demand, despite anticipating a slight gross margin dip due to higher costs. TSM plans to increase its U.S. investment to $65 billion, including advanced 2-nanometer chip production by late 2025, aiming for a gross margin above 53%. TSM stock has risen 52% in the past year, with exposure available through ETFs like TDIV and XNTK.
April 19, 2024 | 1:35 pm
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POSITIVE IMPACT
Investors can gain exposure to TSM through the First Trust NASDAQ Technology Dividend Index Fund (TDIV), which may see a positive impact from TSM's strong performance and strategic global expansion.
Given TSM's significant performance and strategic moves, ETFs like TDIV that offer exposure to TSM could see a positive impact. TSM's strong market position and expansion plans are likely to be viewed favorably by investors, potentially increasing TDIV's attractiveness.
CONFIDENCE 80
IMPORTANCE 70
RELEVANCE 70
POSITIVE IMPACT
TSM is adjusting its pricing model to include a premium for chips manufactured outside Taiwan, aiming to expand globally amid rising costs and tensions with China. Despite a slight expected dip in gross margin, TSM reported strong Q1 profits and anticipates revenue growth from AI chip demand.
The introduction of a pricing premium for chips made outside Taiwan reflects TSM's strategic move to manage rising operational costs and geopolitical risks. Strong Q1 profits and positive revenue growth expectations from AI chip demand signal robust financial health and market position, likely leading to a positive short-term impact on TSM's stock price.
CONFIDENCE 90
IMPORTANCE 90
RELEVANCE 100
POSITIVE IMPACT
The SPDR NYSE Technology ETF (XNTK), which provides exposure to TSM, may benefit from TSM's pricing strategy adjustments, global expansion, and strong market position in the semiconductor industry.
As TSM demonstrates strong performance and strategic initiatives for global expansion, ETFs like XNTK that include TSM could see positive impacts. TSM's efforts to manage costs and geopolitical risks, along with its growth in the AI chip market, support a positive outlook for XNTK.
CONFIDENCE 80
IMPORTANCE 70
RELEVANCE 70
NEUTRAL IMPACT
Nvidia Corp, a key supplier to TSM, may experience indirect impacts from TSM's pricing adjustments and global expansion efforts, especially in the AI chip market.
While the article directly mentions Nvidia as a key supplier to TSM, the specific short-term financial impact of TSM's pricing strategy and global expansion on Nvidia is less clear. However, given the partnership and Nvidia's stake in the AI chip market, there could be indirect effects worth monitoring.
CONFIDENCE 75
IMPORTANCE 60
RELEVANCE 50