GET IN EARLY! I’m Investing In This UNSTOPPABLE AI Chip Company

Introduction

What if I told you that the most powerful AI company on Earth isn't NVIDIA? It isn't Tesla, or Google, or any other company in the Magnificent Seven. And what if it was growing faster and priced cheaper than almost every other tech giant, with a business that will never be disrupted? Buying that stock would be a great way to get rich, without getting lucky. Your time is valuable, so let's get right into it. First things first, I'm not here to waste your time.

This video is all about the Taiwan Semiconductor Manufacturing Company, and here's everything I'm going to cover. How TSMC actually makes their money, why TSMC is still cheap, even with a trillion dollar market cap, why TSMC's biggest risk may never become reality, and of course, what all this means for TSM stock as a result. But let's start with what makes this company so special. TSMC is the world's best semiconductor foundry by far.

Table of Contents

1. What Makes TSMC Special
2. TSMC Earnings and Valuation
3. TSMC Risks

They don't sell finished chips or consumer electronics under their own brand. Instead, they make money by selling the most advanced, custom-made semiconductor wafers to the world's top tech companies, who reserve TSMC's production capacity years in advance for their own CPUs, GPUs, and other kinds of processors. Let's get specific about what they actually make and for who. TSMC makes the A-series chips for Apple's iPhones and the M-series chips for the iPads, MacBooks, and iMacs.

They also make Qualcomm's Snapdragon processors, which power flagship Android phones like the Samsung Galaxy S24 and the Tensor G5 chips that are going into the Google Pixel 10. TSMC makes the Tensor cores for Nvidia‘s Hopper H100s and H200 GPUs, as well as the H20 GPUs that Nvidia sells to China. Oh, and the Blackwell GPU dies that go into the Blackwell B100 chips.

they also make the chips for nvidia's competitors like amd's instinct mi300s mi325s and mi355 accelerators which compete with nvidia's data center gpus in the west as well as the instinct 308s that amd sells to china tsmc makes the custom tranium and inferentia chips for amazon web services the custom tensor processing units for google cloud the maya ai accelerators for microsoft Azure, the meta training and inference chips for meta platforms, and the full self-driving chips that go into every Tesla car, truck, cybercab, and humanoid robot.

As a result, TSMC has a 90% share of the global AI chip market, which is expected to almost 9x in size over the next 8 years. That's a compound annual growth rate of 31% through 2033. That means TSMC should grow that fast even if their margins and their market share stay the same.

TSMC Earnings and Valuation

TSMC reported record revenues of billion for the quarter, which is up almost 18% quarter over quarter and 44% year over year. Their operating margins expanded from 42% last year to 49.6% today. Having almost 50% operating margins doesn't just make them more profitable than almost every hardware, semiconductor, or manufacturing company; it's also better than the average software company.

It's also better than the average software company, making TSMC one of the most profitable tech companies on the planet. Today, 60% of their revenue comes from high-performance computing and AI data centers, another 27% comes from smartphone chips, while IoT devices and automotive chips account for the remaining 10%.

TSMC Risks

Warren Buffett's biggest holding is Apple, and at one point, it was 50% of his entire portfolio. 50. 5-0. Almost all of Apple's chips were made by TSMC. So Berkshire Hathaway was seriously exposed to this risk long after they sold their last share of tsm stock and it's not just apple without tsmc there's no nvidia there's no amazon web services no microsoft azure no google cloud tsmc can't just be shut down and get quickly restarted especially by outside forces the specialized equipment materials and expert workforce required to keep it all running can't be quickly relocated or replaced by other chip makers like samsung or intel u.s intelligence estimates that the sudden loss of tsmc could slash up to a trillion dollars per year from global gdp while other forecasts say it would be the single biggest economic shock since the great depression chip shortages would drive prices up by an estimated 59 overnight that would cause every market from automotive and industrial equipment to consumer tech and digital services to become much less dependable and much more expensive which would plunge the world's economy into a new spiral of inflation and unemployment i'm not trying to be dramatic here but if tsmc stops making chips we will all have much bigger problems than their stock price and this really isn't a risk that any investor can avoid not even warren buffett if you're invested in ai you're already invested in tsmc but there are two big factors that mitigate this risk first china can't make chips anywhere close to tsmc's most advanced nodes which means they would face the same massive economic consequences as the rest of the world and second every major government and tech company is already diversifying their supply chains as we speak and tsmc is investing over a hundred billion dollars on fabs and packaging plants in the us Japan and Germany, so this risk is getting lower over time.

Key Takeaways

TSMC is the world's leading chip maker, with a 90% share of the global AI chip market. The company's earnings and valuation are strong, with record revenues and operating margins. However, there are risks associated with investing in TSMC, including the potential for China to invade Taiwan and disrupt the company's operations. Despite these risks, TSMC remains a great way to get rich without getting lucky, with a strong track record of growth and a competitive advantage in the AI chip market.