Rising Strength in AI Semiconductors Benefits Nvidia

Taiwan Semiconductor Manufacturing (TSMC) recently reported its third-quarter earnings, providing a mixed outlook on the overall chip industry demand. However, one area that showed undeniable growth was AI semiconductors.

This is excellent news for Nvidia, as TSMC is the main supplier for manufacturing AI chips for the company. Nvidia currently dominates the market for semiconductors used in AI applications.

While TSMC acknowledged the weakness in the macroeconomic environment and a slow recovery in China, they also noted some early signs of stabilization in the PC and phone markets. Nevertheless, it is still too early to predict a significant rebound.

During the earnings call, an analyst inquired about the improvement in artificial intelligence orders over the past three months. TSMC confirmed that AI demand continues to strengthen, and they are actively working on increasing their capacity to meet this growing demand.

TSMC CEO C.C. Wei emphasized their dedication to meeting the rising demand for AI chips. Additionally, TSMC management announced their plans to double the advanced chip-packaging capacity, known as CoWoS, by the end of 2024. This expansion is crucial for manufacturing Nvidia’s highest-performing AI chips.

Overall, while TSMC’s earnings report painted a nuanced picture of the chip market, there is no doubt that the demand for AI semiconductors is on the rise. As TSMC continues to increase its capacity, this bodes well for Nvidia’s position in the market.

Nvidia Stock Not Expected to be Significantly Impacted by Recent Export Controls


Earlier this week, concerns arose among analysts regarding the impact of tightened export controls on Nvidia stock. The new restrictions, which could potentially limit the sale of lower-performance AI chips to China, prompted some caution among experts. However, Nvidia expressed confidence in its ability to weather these changes and did not anticipate any significant short-term consequences for its financial results.

The Perplexing Hand-Wringing over China Restrictions

While the latest export controls have caused some unease, it is important to consider the broader context. Last year, performance restrictions were already in place, suggesting that Nvidia’s long-term revenue from China would have been hindered regardless as AI chip technology advanced.

Bernstein analyst Stacy Rasgon highlights the inevitable nature of these restrictions, stating that even if the thresholds were not lowered, they would not have been raised. This would have resulted in a widening gap between what could be legally sold into China versus the rest of the world.

Growing Evidence of Strong AI Chip Demand

Despite concerns surrounding China, there is an increasing body of evidence indicating a strong demand for AI applications and Nvidia’s chips worldwide. This suggests that Nvidia’s success is not solely dependent on its relationship with China, but rather on the broader market for AI technology.

Overall, while export controls have sparked apprehension in the industry, Nvidia remains confident in its ability to meet demand and navigate any potential challenges that may arise.

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