Can TSMC Beat Big Tech in Valuation?
Driven by the rapid expansion in AI, NVIDIA briefly became the world’s most valuable company, surpassing Microsoft. Although Microsoft regained the top position, pushing NVIDIA down to third place, another semiconductor giant, TSMC, is steadily climbing the ranks of the world’s most valuable companies. In the second week of July, Taiwan Semiconductor Manufacturing Company’s (TSMC) market share soared 4.8% on the New York Stock Exchange with valuation touching the $1 trillion mark. This made TSMC the first Asian company to break into the coveted trillion-dollar bracket. While TSMC’s valuation has also dropped since then, it does signify the importance of the Taiwanese company, whose fabrication capabilities are empowering much of the unprecedented AI growth. The Secret Sauce of AI Accelerators Last year, the demand for NVIDIA’s high-end GPU skyrocketed creating a shortage in the market. TSMC’s limited capacity was one of the reasons. TSMC exclusively manufactures NVIDIA’s cutting-edge AI training chips, such as the latest Blackwell series and previous generations like the H100 series. It produces NVIDIA’s high-performance GPUs using state-of-the-art process technologies, which include nodes at 5nm and 4nm. Not just NVIDIA, TSMC also manufactures chips for Intel and AMD, the other two big players in the GPU space. Moreover, big tech companies like Google, AWS and Microsoft have all announced their own AI chips to train AI models. All these chips are powered by TSMC. Much of the high-end smartphones or laptops are powered by TSMC’s silicon. Not many companies possess the capability to fabricate 5 nm or smaller silicon. The only other company which is able to do this is Samsung Foundry. TSMC holds around 60% market share of the third-party chip manufacturing business compared to Samsung Electronics, which holds 12%. In fact, according to TSMC, the AI semiconductor segment is expected to grow by 250% this year. Another notable client of TSMC is Apple. Its latest chip, M4, which powers its latest iPad, was also developed by TSMC using its 3 nm node technology. TSMC’s silicon powers many smartphones, including iPhones. Google also plans to leverage TSMC for Pixel 10 (expected to release in 2025) and onwards. The Taiwanese giant’s silicon also powers Mediatek and Qualcomm processors, the two most popular processors found in almost all smartphones. The Big-Tech Fight In December 2023, TSMC was the 12th most valuable company in the world. Now, it has broken into the top 10, sitting at the 9th place, just behind Meta and Berkshire Hathaway, as per companiesmarketcap.com. In 2023, AI accounted for just 6% of TSMC’s $69.30 billion revenue. According to TSMC, this year, revenue from AI is set to more than double in 2024, reaching a low-teens percentage of total revenue. Over the next five years, it anticipates AI-related revenue to grow at a compound annual growth rate of 50%. Revenue-wise, TSMC has transitioned significantly, now deriving more than half of its revenue from high-performance computing, a segment bolstered by surging AI demand. In earlier years, smartphones held sway over its revenue share. Its share prices have more than doubled since the AI boom took off in late 2022. If the forecast comes true, TSMC’s market capitalisation could surpass Meta soon. TSMC’s projected revenue growth for 2025 is 22% compared to Meta’s 14.13%. But can the company surpass Amazon and Google in the long run? That would be interesting to see. Without a doubt TSMC’s trajectory looks bright, and the company is capitalising on AI in the same manner as NVIDIA did.
According to TSMC, the AI semiconductor segment is expected to grow by 250% this year.
According to TSMC, the AI semiconductor segment is expected to grow by 250% this year.
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I have a keen interest in creative writing and artificial intelligence. As a journalist, I deep dive into the world of technology and analyse how it’s restructuring business models and reshaping society.