Nvidia AI Growth Substantiated By Taiwan Semiconductor And Meta Reports (NASDAQ:NVDA) - Seeking...

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Nvidia AI Growth Substantiated By Taiwan Semiconductor And Meta Reports (NASDAQ:NVDA) - Seeking Alpha

Birdlkportfolio/iStock via Getty Images I'm still amazed to see people doubting artificial intelligence ("AI"), thinking it's nothing more than a fad, hype, investor "hopium," or vaporware. I know fads can see billions of dollars spent on them, and I've witnessed vaporware pushed from major vendors of mine amount to nothing, so I get the thinking that AI will be nothing more than the next "cool thing" to hit the trash bin. But there's something more pervasive about AI that the average person doesn't see. And while the average person may not see it, two major companies do, along with the need for it. Both just reported in the last week or so. As I've said before, most people don't even realize the social media apps they use have been invigorated by more AI in the last eight months than they ever have been over those apps' existence. But I'm seeing AI push into other realms now. I had a coworker tell me in the last week she used AI to generate a headshot for her work avatar and LinkedIn profile pic because she didn't want to pay for a professional headshot. Before I was even privy to her explanation, the picture looked good enough that I didn't think beyond the initial, "Hmmm, I mean, it looks like her..." Are photographers going to go out of business? Probably not today or tomorrow. But in the not-so-distant future, I'm not so sure. I'll ask you this: do fads replace the cost or use of something else, providing utility to the average person? Honestly, think about it. More to this article's point, everyone interested in stocks or tech knows Nvidia Corporation (NASDAQ:NVDA ) has big revenue numbers planned for this year in its Data Center segment. Many are skeptical the company will be able to hit its $11B guidance in a month. I'm not one of those skeptics. Is AI a fad is the question. My position was reinforced this past week when Taiwan Semiconductor Manufacturing Company Limited (TSM) and Meta Platforms, Inc. (META) reported earnings. Now, you might be saying one is a logic chip manufacturer, and one is a social media conglomerate; what do all three have to do with one another? Well, the two have to do with the third's revenue. Taiwan Semiconductor produces the chips in Nvidia's A100 and H100 AI accelerators, while Meta is buying those AI accelerators. Therefore, the read-through between the two earnings reports allows us to see both sides of Nvidia's business - supply and demand. Taiwan Semiconductors' AI Revenue HPC (high performance computing) is a segment of TSM's business. It's the high-performing CPUs for Advanced Micro Devices, Inc. (AMD), Apple (AAPL), Intel (INTC), and Nvidia, among others. And with AMD having a sluggish quarter with another one on tap and weakness in the PC market for Apple and Intel, this accounts for a good portion of TSM's weakness. The HPC segment also contains what the company defines as AI processor demand from CPU, GPU, and AI accelerators. AI processors make up 6% of TSM's total revenue, or $926M. And if AI processors are within HPC, this means AI processors make up 13.6% of HPC revenue. ...server AI processor demand...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. - C. C. Wei, CEO, Taiwan Semiconductor's Q2 '23 Earnings Call. Since TSM likely places various degrees of AI acceleration into this bucket, my take is it includes processors from AMD, Qualcomm (QCOM), Intel, Amazon (AMZN), Google (GOOG, GOOGL), and Nvidia. I've used the customer breakdown found at this new Substack by Sravan to gauge who and what level of revenue is contributed. We know AI processors have been a growing bucket for all of these customers, just based on their press releases and the continued push for "their own chips." But most notable is Nvidia and its need to "procure...substantially higher supply for the second half of the year." For the AI, right now, we see a very strong demand, yes. For the tightness part, we don't have any problem to support. But for the back end, the advanced packaging side, especially for the cohorts, 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 hel...