Nvidia And AMD: AI Updates From Taiwan Semiconductor’s Q2 … – Seeking Alpha Feedzy

 

MF3d

Taiwan Semiconductor Manufacturing Company Limited (TSM) (“TSMC”) reported its Q2 2023 earnings yesterday (July 20, 2023). TSMC’s reduced revenue guidance for the year sent Nvidia Corporation (NASDAQ:NVDA) and Advanced Micro Devices, Inc. (NASDAQ:AMD) shares tumbling. However, TSMC’s commentary on the future of artificial intelligence (“AI”) chips did not receive as much attention. Once we dig into it, TSMC’s commentary on AI is positive for long-term Nvidia and AMD investors. Below I explain the reasons for this assessment.

[AMD CEO Lisa] Su’s claim that the market for AI chips will cross $150 billion by 2027 aligns with Nvidia Corporation CEO Jensen Huang’s statements during Nvidia’s last earnings call about trillions of dollars of data center infrastructure being built or replaced in coming years.

Today, server AI processor demand, which we define as CPUs, GPUs and AI accelerators that are performing training and inference functions accounts for approximately 6% of TSMC’s total revenue. We forecasted this to grow at close to 50% CAGR in the next 5 years and increase to low teens percent of our revenue.

For the AI, right now, we see a very strong demand, yes. For the front-end part, we don’t have any problem to support. But for the back end, the advanced packaging side, especially for the CoWoS [Chip on Wafer on Substrate], we do have some very tight capacity to – very hard to fulfill 100% of what customer needed. So we are working with customers for the short term to help them to fulfill the demand, but we are increasing our capacity as quickly as possible. And we expect these tightening will be released in next year, probably towards the end of next year. But in between, we’re still working closely with our customers to support their growth.

We are planning our CoWoS capacity, although probably still not enough, but we’re working very hard to increase it. Overcapacity, today is not a concern, today’s concern is not enough capacity to support all the very strong demand.