CryptoCurrency
Meet the Newest Artificial Intelligence (AI) Chip Stock to Join Nvidia in the $1 Trillion Club
Nvidia (NASDAQ: NVDA) flew into the $1 trillion club in May 2023 as it capitalized on growing spending on artificial intelligence. The chipmaker has gone on to increase more than three-fold in value since, becoming the second most valuable company in the world, behind only Apple.
The rest of the $1 trillion club is full of some of Nvidia’s biggest customers, the “hyperscalers” building out massive data centers for training and running generative AI. But the newest member of the club is actually a key part of Nvidia’s supply chain. It’s not just Nvidia, though. This semiconductor company works closely with almost every tech company in the $1 trillion club, and now, it’s finally a member itself.
The newest artificial intelligence (AI) chip stock in the $1 trillion club is Taiwan Semiconductor Manufacturing Company (NYSE: TSM). Here’s why $1 trillion may be just a milestone in the stock’s continued ascension into the ranks of the mega-caps.
“The world’s best by an incredible margin”
Taiwan Semiconductor, or TSMC, is a chip manufacturer, also known as a foundry or fab. It’s the top choice for many chip designers, attracting over 60% of spending in the industry. There’s good reason for that. TSMC’s technology is much further ahead than that of nearly every competitor.
At an investor conference last month, Nvidia CEO Jensen Huang said: “We’re fabbing out of TSMC because it’s the world’s best. And it’s the world’s best not by a small margin, it’s the world’s best by an incredible margin.”
That’s evidenced in TSMC’s recent financial results for the third quarter. The company reported 39% year-over-year revenue growth. Its gross margin expanded to 57.8% from 54.3% last year, and net income grew 54.2% as a result. The driving force behind those stellar results is TSMC’s technology lead. That makes it the must-have partner for anyone wanting to print advanced chips for AI (like Nvidia’s GPUs) or smartphones (like Apple’s iPhone).
“Our business in the third quarter was supported by strong smartphone and AI-related demand for our industry-leading 3nm and 5nm technologies,” CFO Wendell Huang wrote in the earnings release.
The AI story may be just getting started
Management expects revenue from AI chips to more than triple in 2024, but the segment will only account for a mid-teen percentage of TSMC’s total for the year. There’s a long runway for growth for TSMC in AI, and it’s investing to take advantage of the opportunities presented.
Nvidia works with TSMC to print its chips, but it’s not the only AI chipmaker taking advantage of the leading fab’s advanced technology. Microsoft, Alphabet, Meta, Broadcom, and Advanced Micro Devices are all contracting with TSMC to develop AI accelerator chips. Apple has been using TSMC for years to develop its chips for the iPhone and iPad, and more recently, the Mac.
In other words, no matter how the future of AI data centers, large language model training, and AI inference plays out, TSMC stands to be a big winner.
Management increased its capital expenditure expectations for 2024 to more than $30 billion, and it expects to spend even more in 2025. It’s also spending on research and development, which increased 11.4% year over year last quarter.
Both are keys to TSMC’s ongoing success. As the largest foundry in the world by a wide margin, it’s capable of spending more on machinery and technology while advancing its technological capabilities than any other competitor. That ensures it maintains its position as the technology leader, which in turn leads to continued relationships with the biggest customers in the world. That virtuous cycle is a tremendous competitive advantage for TSMC that’s hard to overcome.
$1 trillion may be just the start
While shares of TSMC more than doubled in 2024, there’s still room for the stock to climb higher.
At its current share price, it trades for just over 25 times analysts’ estimates for 2025 earnings. And that’s before they’ve had a chance to update their models with the most recent results and guidance from management. Over the next five years, TSMC is capable of growing its bottom line at a rate in the 20% range. AI spending remains robust, and the company is able to maintain its high gross margin from strong utilization even as it brings the next generation of technology online. That level of growth more than justifies the current earnings multiple.
What’s most attractive about the company is that it’s protected from future changes in the industry. No matter who’s designing the chips needed for data centers and smartphones, TSMC is sure to grab the vast majority of that business, thanks to the virtuous cycle described above. Given the excellent execution of management over the last few years amid the AI boom, the future continues to look bright for the newest member of the $1 trillion club.
Should you invest $1,000 in Taiwan Semiconductor Manufacturing right now?
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Adam Levy has positions in Alphabet, Apple, Meta Platforms, Microsoft, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Apple, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Meet the Newest Artificial Intelligence (AI) Chip Stock to Join Nvidia in the $1 Trillion Club was originally published by The Motley Fool
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Nasdaq, S&P 500 sink as tech leads losses ahead of Tesla earnings
Sales of existing homes fell in September as house hunters remained on the fence about buying a home despite mortgage rates easing during the month.
Existing home sales slipped 1.0% from August’s tally to a seasonally adjusted annual rate of 3.84 million, the National Association of Realtors said Wednesday. That marked the lowest rate since October 2010. Economists polled by Bloomberg expected a pace of 3.88 million in September.
On a yearly basis, sales of previously owned homes were 3.5% lower in September. The median home price rose 3.0% from last September to $404,500, marking the 15th consecutive month of annual price increases.
“Home sales have been essentially stuck at around a 4 million-unit pace for the past 12 months,” NAR chief economist Lawrence Yun said in a press release.
There have been significant challenges that have weighed on sales activity, including a lack of inventory, escalating prices, and elevated mortgage rates. Last month, however, those factors turned around.
The Federal Reserve cut its benchmark rate by half a percentage point in September. While the central bank doesn’t set mortgage rates, its actions influence their direction of movement.
Mortgage rates hit the lowest level since February 2023 ahead of the Fed decision to ease, while listing inventory picked up.
But overall, that hasn’t been enough to entice buyers.
“Some consumers are hesitating about moving forward with a major expenditure like purchasing a home before the upcoming election,” Yun said.
CryptoCurrency
Tesla stock jumps on Q3 earnings beat
Tesla (TSLA) reported mixed third quarter results after the bell on Wednesday, but the stock jumped in after-hours trading as investors cheered the earnings beat, higher gross margins, and news that Tesla’s cheaper EV is on track for production next year.
For the quarter, Tesla reported revenue of $25.18 billion vs. $25.4 billion per Bloomberg consensus, higher than the $25.05 billion it reported in Q2 and also topping the $23.40 billion Tesla reported a year ago. Tesla posted adjusted EPS of $0.72 vs $0.60 expected, on adjusted net income of $2.5 billion and free cash flow of $2.9 billion.
The closely watched gross margin figure came in at 19.8%, much higher than the 16.8% expected.
Tesla shares were up nearly 8% in after hours trade.
“We delivered strong results in Q3 with growth in vehicle deliveries both sequentially and year-on-year, resulting in record third-quarter volumes,” the company said in its earnings deck. “Preparations remain underway for our offering of new vehicles — including more affordable models — which we will begin launching in the first half of 2025.”
Earlier this month, Tesla (TSLA) announced third quarter deliveries that slightly missed expectations, sending the stock lower.
Tesla said it delivered 462,890 vehicles in Q3, up 6.4% quarter over quarter, to mark the first quarter of delivery growth this year. The numbers also came in ahead of the 435,059 EVs the company delivered in the year-ago period. But Wall Street had expected Tesla to deliver closer to 463,897, according to Bloomberg.
“Refreshed Model 3 ramp continued successfully in Q3 with higher total production and lower cost of goods sold quarter-over-quarter. Cybertruck production increased sequentially and achieved a positive gross margin for the first time,” Tesla said in its report.
Tesla said it expects vehicle deliveries to achieve “slight growth” in 2024.
Ahead of Tesla’s Q3 disclosure, shares were down approximately 11% since Tesla revealed its robotaxi, dubbed the Cybercab, at its showy “We, Robot” event from the Warner Bros. studio lot in Burbank, Calif., on Oct. 10.
The debut and release of a cheaper EV is what many analysts and industry watchers believe will spur the next leg higher of EV sales, as even CEO Elon Musk has said before. During its Q2 report, Tesla and Musk said the company remains on track for the production of new vehicles, likely including a cheaper EV, in the first half of next year.
Investors and analysts were left wanting more details from Tesla’s “We, Robot” event on the Cybercab itself and detailed testing plans, along with questions about the development of Tesla’s sub-$30,000 EV, dubbed the Model 2.
CryptoCurrency
Transak hit by data breach, 92K users exposed
Transak disclosed a data breach affecting over 92,000 users after a phishing attack compromised an employee’s laptop.
CryptoCurrency
The Dow plummets more than 600 points and is on track for its worst day in more than a month
The Dow Jones Industrial Average and other major indexes suffered a steep decline Wednesday afternoon as the yield on the benchmark 10-year U.S. Treasury note continued its upward climb, reaching 4.23%—a level not seen since July.
In the afternoon, the Dow dropped 631 points, or 1.4%, heading for its worst day in over a month. Meanwhile, the tech-heavy Nasdaq and the S&P 500 declined by 2.2% and 1.4%, respectively. However, there was some relief for investors as oil prices eased, with West Texas Intermediate (WTI) futures trading around $70.65 per barrel.
The Federal Reserve’s Beige Book, released in the afternoon, reported that economic activity remained largely unchanged across the 12 Federal Reserve Districts, with the Southeast significantly impacted by a harsh storm season.
On Wednesday, all eyes are on Tesla (TSLA) as the company prepares to release its latest earnings report. Analysts expect earnings per share to be 60 cents, down from 66 cents a year ago but an improvement from 52 cents in the previous quarter, according to FactSet estimates. Revenue is projected to hit $25.4 billion, compared to $23.3 billion in the third quarter of 2023 and $25.5 billion in the preceding quarter.
Apart from Tesla, investors are closely monitoring earnings reports from other major corporations, including AT&T (T), Boeing (BA), and Coca-Cola (KO).
McDonald’s stock plunges over 5%
McDonald’s (MCD) shares took a sharp hit, falling over 5% after the Centers for Disease Control and Prevention (CDC) linked the chain’s Quarter Pounder burgers to an E. coli outbreak. The outbreak has led to 10 hospitalizations and one death, driving a significant decline in McDonald’s stock during the afternoon trading session.
As of now, 49 cases have been reported across 10 states between Sept. 27 and Oct. 11, with a majority of illnesses occurring in Colorado, Nebraska, Utah, and Wyoming. The CDC noted that most of those affected had eaten a Quarter Pounder. Investigators are working swiftly to identify the contaminated ingredient.
Spirit Airlines stock soars 30%
After a failed attempt at merging with JetBlue (JBLU-0.80%), ultra-low-cost carrier Spirit Airlines (SAVE+28.01%) is reportedly turning back to a familiar partner. The Wall Street Journal (NWSA-0.34%), citing people familiar with the matter, reports that Spirit and Frontier Airlines (ULCC+3.05%) are in early talks over a potential merger. The news sent Spirit’s stock soaring nearly 30% on Wednesday.
–Francisco Velasquez and Rocio Fabbro contributed to the article
CryptoCurrency
Zanzibar’s new blockchain sandbox aims to drive tech startup growth
The semi-autonomous region of Tanzania is taking advantage of a sandbox regulatory framework adopted in July.
CryptoCurrency
Price analysis 10/23: BTC, ETH, BNB, SOL, XRP, DOGE, TON, ADA, AVAX, SHIB
Bitcoin’s correction ignited selling in altcoins, which are slipping below critical support levels.
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