Announcements at a trade show gave the semiconductor specialist a boost.
Shares of Taiwan Semiconductor Manufacturing (TSM 2.59%), also called TSMC, were climbing on Monday, jumping as much as 4%. As of 1:40 p.m. ET today, the stock was still up 1.9%.
The Computex trade show kicked off in Taiwan this weekend with positive news for the semiconductor specialist.
AI is kicking into high gear
The keynote address for the event was given by Nvidia (NVDA 4.89%) CEO Jensen Huang, who held a surprise for investors. The biggest revelation is that the company is accelerating its product upgrade cycle from two years to one.
“Our company has a one-year rhythm,” Huang said. “Our basic philosophy is very simple: Build the entire data center scale, disaggregate and sell to you parts on a one-year rhythm, and push everything to technology limits.” This has direct implications for TSMC. Not only is Nvidia the gold standard in AI processors, but it is also TSMC’s second-largest customer.
It didn’t hurt that Advanced Micro Devices CEO Lisa Su reported that the company is working with TSMC on numerous new products, including 3-nanometer wafers.
Foundry to the AI stars
TSMC’s foundry produces an estimated 90% of the world’s most advanced semiconductors, particularly those used in artificial intelligence (AI). Increasing demand for the chips used for AI training and inference is seen as a boon to TSMC. The company reported that April sales soared 60% year over year and 21% sequentially, driven by insatiable demand for AI processors.
The appetite for AI adoption shows no signs of slowing. The generative AI market is expected to be worth $1.3 trillion by 2032, a compound annual growth rate of 42%, according to Bloomberg Intelligence. While that amount cuts across a broad cross-section of hardware and software, it helps illustrate the strong and growing demand for AI, which should continue to bolster TSMC’s fortunes.
Furthermore, at just 24 times earnings, TSMC is selling at a discount to a multiple of 27 for the S&P 500, making the stock a buy.
Danny Vena has positions in Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
