AMD’s upcoming Zen 6 processor, codenamed ‘Medusa,’ is rumored to launch in late 2025. This follows the release of Zen 5-based processors later this month. Details suggest Medusa will target both laptops and desktops, utilizing TSMC’s N3E process. The information is based on credible leaks but should be taken with a grain of salt.
TSMC’s recent announcements have raised questions about Intel’s claims of chip superiority. TSMC’s new A16 chip fabrication process and backside power supply technology surpass expectations, driven by demand from AI chip companies. Intel’s similar technology, 14A, may face competition as analysts debate its effectiveness. However, both TSMC and Intel’s technologies are still in development and must deliver on their promises.
Intel’s upcoming AI chip, Gaudi 3, is expected to drive significant revenue growth for three major semiconductor companies: TSMC, Alchip, and Wistron. Morgan Stanley predicts that TSMC will produce the chips using its advanced 5-nanometer process, while Alchip will provide design services and Wistron will supply the baseboards. The financial institution forecasts shipments of 300-400k units by 2025, generating up to $3 billion for Intel. TSMC and Alchip are viewed as long-term winners in the AI semiconductor demand. The news has positive implications for Intel’s stock, which has been consolidating in recent months.
Intel is scheduled to release its earnings tomorrow, April 25. The company is set to report the financials of its foundry separately from those in its design business–a first in its history. If the foundry business shows strong results, that could pique the interest of investors, who this year, have been buying shares of TSMC (TSM) while selling shares of Intel.
The stock market experienced a downturn last week, with AI stocks taking a hit. Nvidia Corporation (NASDAQ: NVDA) dropped significantly, despite the absence of negative data points related to AI. The company’s Neutral investment thesis remains upheld, as the stock exhibited excessive growth during its rally to $974. Positive AI Data Points To clarify the sudden decline, it’s crucial to note that AI-related data points from last week were not negative, contrary to market interpretation. Taiwan Semiconductor Manufacturing Company Limited (NYSE: TSM) projected strong growth rates of over 20% in 2024 due to high AI demand. While the foundry acknowledged a slowdown in overall chip demand, TSMC attributed this primarily to traditional server CPU chip demand, which favors chip production for Nvidia over Intel (INTC). Super Micro Computer (SMCI) announced its FQ3 ’24 earnings call without providing guidance updates. However, this does not necessarily indicate a negative signal for AI GPU demand, as the company has not consistently provided guidance updates in the past. Paying the Right Price Nvidia was previously identified as aggressively priced at over $600, leading to recommendations for investors to exit their positions. The stock has since surged to $974, indicating an irrational appetite for AI investments that is now fading. Nvidia’s forecasted sales for FY25 (2024) are $112 billion, projected to exceed $160 billion by FY27. While the company’s sales growth rates are expected to normalize, the FQ1 ’26 sales growth forecast is estimated to drop below 30%. Margins and Operating Expenses Nvidia faces the potential for margin compression in the future. The company’s FQ1 ’25 gross margins were projected at 76.3% to 77.0%, with limited quarterly operating expenses of $2.5 billion. Over time, Nvidia will likely need to invest more to maintain profitability. The operating expense base below 10% of revenues also appears unsustainable. During FY23, before the AI GPU chip sales surge, Nvidia spent nearly $7 billion on opex, which amounted to over 25% of revenues. If this trend continues, Nvidia’s opex will rise significantly. Takeaway Despite the recent market downturn, the AI boom is not ending. The market is taking profits on Nvidia, and further declines are possible during the digestion period. Investors are advised to let the stock slip further, potentially back to the $600 range, to mitigate the risk of inevitable margin pressures.
Investors are bracing for a potential further drop in Taiwan Semiconductor Manufacturing Co. (TSMC) stock, which has witnessed a sharp decline in recent days. The chipmaker’s stock has been on a downward trajectory since its April 11 earnings call, where it revised its growth forecasts for the semiconductor industry. These revisions reflect industry challenges and led to a market value loss of over $100 billion.
TSMC’s plan to construct semiconductor manufacturing plants overseas will result in higher chip production costs, which will be passed on to customers. The Taiwanese foundry’s CEO, C.C. Wei, confirmed that microchips produced outside of Taiwan will face elevated manufacturing expenses due to factors like inflation and energy costs. Despite global expansion, TSMC aims to maintain a 53% gross margin by adjusting pricing strategies to cover increased expenses. The company seeks government support and leverages its technological advantage to mitigate costs.
