Artificial intelligence (AI) stocks might be the big thing on Wall Street, with rising valuations and trending tickers. But that doesn't mean there aren't good values to be found. While there are some fears that a bubble will form in AI, many of the big tech stocks leading the charge look downright undervalued. In fact, some of them even fall into the classic Warren Buffett model of value investing.Buffett is known for avoiding tech stocks for most of his career, but there are some AI-related tech stocks th ...

Core Viewpoint - Despite market uncertainties, it is a favorable time to invest in growth stocks with a cautious approach, starting with smaller investments and potentially increasing positions if stock prices decline. Group 1: Nvidia - Nvidia is the leader in AI infrastructure, with its GPUs being the primary chips for AI workloads, supported by its proprietary software platform CUDA [3][4] - Nvidia captured over 90% of the GPU market in Q1, with data center revenue growing more than 9 times in two years, and demand for its new Blackwell chips is accelerating [4][5] - Nvidia is positioned as a key investment in AI infrastructure despite potential risks from data center spending slowdowns [5] Group 2: Taiwan Semiconductor Manufacturing (TSMC) - TSMC is crucial in manufacturing advanced AI chips, holding significant capabilities that few companies possess [6][7] - Nearly 60% of TSMC's business comes from high-performance computing chips, with strong demand continuing [7] - TSMC is raising prices to offset near-term margin pressures and is expected to be a long-term winner in the AI sector [8] Group 3: Pinterest - Pinterest has transformed by embracing AI, leading to increased engagement and improved average revenue per user (ARPU) [9][10] - The company’s AI-driven solutions are enhancing user engagement and helping advertisers run more effective campaigns [10] - Despite potential economic slowdowns, Pinterest has strong growth prospects due to its large user base [11] Group 4: Eli Lilly - Eli Lilly is benefiting from the growth of GLP-1 drugs, with Mounjaro and Zepbound generating $6.1 billion in revenue last quarter [12] - Zepbound's revenue surged from $517 million to $2.3 billion year-over-year, indicating strong momentum [12] - The company’s next-generation oral GLP-1 drug, orforglipron, shows promise and has advantages over existing injectable drugs [13][14] Group 5: e.l.f. Beauty - e.l.f. Beauty is entering a growth phase following its $1 billion acquisition of Rhode, which generated $212 million in sales despite limited product offerings [15][16] - The acquisition is timely as e.l.f.'s growth slowed, and Rhode's expansion into Sephora presents a significant opportunity [16][17] - e.l.f. has strong retail relationships that can facilitate Rhode's distribution growth, making it an attractive investment opportunity [17]

Core Insights - TSMC is projected to increase its foundry market share from 70% in 2025 to 75% in 2026, driven by strong demand for 2nm and 3nm wafers from major clients like Nvidia, AMD, and Apple [2][12] - The AI data center market is rapidly expanding, with TSMC holding nearly 100% market share in logic semiconductors for AI data centers, producing chips for major companies like Microsoft, Amazon, and Google [3][4] - TSMC's advanced process and packaging technologies are critical for meeting the growing demands of AI applications, with plans to enhance production capacity in the U.S. [6][12] Market Share and Financial Strength - TSMC's foundry market share is expected to reach 67% by Q4 2024, a 10% increase from early 2023, while Samsung holds 11% [12] - TSMC's market capitalization is close to $1 trillion, indicating a strong financial position, which is attractive to clients in the AI sector [13] Technological Leadership - TSMC is the only foundry capable of producing advanced AI data center chips, with a focus on maintaining high yield rates and production capacity [8][20] - The company has been developing multi-chip substrate packaging for several years, enhancing its ability to meet complex product demands [10] Future Outlook - TSMC is expected to dominate the advanced packaging market, with estimates suggesting it will hold 90% of the CoWoS capacity by 2026 [12] - The demand for AI accelerators is projected to grow significantly, with the total addressable market for data center AI accelerators expected to exceed $500 billion by 2028 [15] Competitive Landscape - Major cloud service providers are increasingly designing their own AI accelerators, but they remain heavily reliant on TSMC for production [16][18] - TSMC's management strength and operational efficiency are key competitive advantages, allowing it to handle complex technical challenges across multiple fabs [14][20]

Group 1 - Taiwan Semiconductor Manufacturing Company Limited (TSM) is benefiting from AI trends, leading to a stock price increase of 10% [1] - The company is positioned well in the U.S. stock market, reflecting strong performance and investor confidence [1] - TSM's growth is attributed to its expertise in technology and its ability to navigate complex market dynamics [1] Group 2 - The article emphasizes the importance of fundamental analysis in making informed investment decisions [1] - The author aims to provide accessible insights for both seasoned and novice investors, fostering a collaborative exploration of market opportunities [1] - TSM's strategic focus on technology sectors is highlighted as a key driver for uncovering promising investment prospects [1]

Group 1 - Taiwan's authorities have placed Huawei and SMIC on an export blacklist, indicating a strong alignment with U.S. policies to suppress China's chip industry [2][13] - TSMC has already ceased orders from Huawei in 2023, and while SMIC faces equipment procurement restrictions, other mainland manufacturers are stepping in, limiting the impact on Huawei [2][6] - Taiwan's semiconductor manufacturers are heavily reliant on materials from mainland China, with over 90% of critical photolithography materials sourced from there, which poses a significant risk to their operations [4][6] Group 2 - The recent actions by Taiwan may lead to a dual loss scenario, as the U.S. has already imposed export taxes on Taiwan, and Taiwan's response could further harm its own interests [6][9] - If mainland China decides to restrict rare earth exports, it could severely impact various sectors in Taiwan, including chips, electronics, and renewable energy [6][12] - The global chip supply chain is undergoing restructuring, with efforts to relocate TSMC's operations to the U.S., but high-end packaging and silicon processing remain in Taiwan, highlighting its critical role [8][9] Group 3 - Taiwan's unilateral export control measures may backfire, potentially leading to a collapse of its chip industry if mainland China retaliates [13] - The call for "independence and self-sufficiency" in Taiwan's chip industry is undermined by its lack of control over the foundational supply chain [13][12] - The high stakes of Taiwan's current strategy could lead to severe consequences if the situation escalates, emphasizing the need for a balanced approach [12][13]

Summary of Key Points from the Conference Call Industry Overview - The global semiconductor equipment industry entered an upcycle in Q1 2025, with a growth rate of 24%. However, the Chinese market showed relative weakness, with product company revenue growth at 9% and capital expenditure by equipment companies declining by 31% [1][2] - The Hong Kong stock market has underperformed compared to the US market, primarily due to frequent new stock issuances and placements affecting liquidity. Despite this, the quality of components in the Hang Seng Tech Index has improved, with companies like CATL having higher valuations in Hong Kong than in A-shares [1][3][4] Financial Forecasts - The revenue forecast for global semiconductor equipment companies has been raised to $142 billion for 2025, reflecting an 11% year-over-year increase. The forecast for the Chinese market has also been adjusted from a 20% decline to a 9% decline, with a domestic localization rate maintained at 23%-24% [1][5] - The global semiconductor market is expected to grow by 13% in 2025 and 9% in 2026, driven by demand for AI chips and end devices [1][7][9] Company-Specific Insights - SMIC's Q1 performance was below expectations, raising concerns about ASP price declines. However, the advanced process market in China is projected to grow fivefold over the next five years, with SMIC and Huahong likely to benefit [1][6] - The top ten global semiconductor companies' growth is significantly driven by NVIDIA, which contributed over half of the growth in product companies, indicating its dominant market position [2][10] Market Trends and Dynamics - The demand for logic and memory chips is expected to grow rapidly, with logic chips peaking at a 23% growth rate in 2025 before slowing down. In contrast, demand for discrete devices is weak [7][8] - The domestic semiconductor industry is seeing a shift, with local equipment companies gaining market share while US companies like Applied Materials, Lam Research, and KLA are losing share. Japanese and European companies are less affected by export controls [6][14] Investment and Future Projections - In Q1 2025, global investments in semiconductor equipment totaled $1.4 billion, with TSMC accounting for over $3 billion. Some companies like Intel and Samsung are entering a downturn phase, highlighting a clear divide in industry strength [12] - By 2028, China's foundry capacity is expected to grow fivefold, driven by domestic companies like SMIC. The localization rate needs to exceed 60% to meet domestic demand [13] Key Companies to Watch - Attention should be given to companies in the NVIDIA and TSMC supply chains, such as Adomas and Tokyo Electron. Domestically, equipment companies are favored over foundries, and foundries are preferred over design firms, which face challenges from companies like Xiaomi entering chip design [15][16]

Group 1 - The fan-out panel-level packaging is regarded as the next generation of advanced packaging, with major players like TSMC, ASE, and Powertech actively competing for opportunities in high-performance computing chip integration [1] - TSMC's technology, named CoPoS (Chip-on-Panel-on-Substrate), is expected to establish a pilot line in Chiayi by 2026, focusing on AI and HPC applications [2][1] - ASE has already established a production line for 300x300mm panel-level packaging in Kaohsiung, utilizing Fan-Out technology [3] - Powertech has been developing its fan-out panel-level packaging technology, named PiFO, since 2019, which is similar to TSMC's CoPoS [4][1] Group 2 - The advantages of panel-level fan-out packaging include larger substrate areas and heterogeneous integration capabilities, enhancing chip performance and functionality, making it suitable for 5G communication and IoT devices [1] - TSMC's CoPoS technology is a square design that allows for increased chip output, with mass production expected by 2028 [2] - TSMC also plans to launch a new CoWoS technology in 2027, which will integrate more logic and memory chips into a single package, aligning with the trends of CoPoS development [2]

Core Viewpoint - Morgan Stanley's recent report provides a detailed analysis of TSMC, highlighting its current challenges and forecasts for 2nm capacity and wafer pricing [1][2]. Group 1: Stock Performance and Market Comparison - TSMC's stock price has increased by 31% over the past three months, outperforming Taiwan's weighted index (TAIEX) which rose by 27% [2]. - In comparison, NVIDIA's stock surged by 53% during the same period, with currency pressures, particularly the appreciation of the New Taiwan Dollar (TWD) against the US Dollar (USD), contributing to TSMC's relative underperformance [2]. Group 2: Financial Forecast Adjustments - The appreciation of TWD by 8.1% has negatively impacted TSMC's gross margin by over 3%, leading to a downward revision of its gross margin expectations for 2025 from 58-59% to 55-56% [2]. - EPS forecasts for 2025 and 2026 have been reduced by 6% and 12%, respectively, due to the adverse effects of exchange rates [2]. Group 3: AI Semiconductor Market Position - TSMC holds a dominant position in the AI semiconductor market, with projected revenue growth from cloud AI semiconductor business at a compound annual growth rate (CAGR) of 40% over the next five years [3]. - By 2027, revenue from cloud AI is expected to account for 34% of TSMC's total revenue, up from 13% in 2024 and 25% in 2025 [3]. Group 4: Strategic Partnerships and Production Capacity - Intel's decision to outsource the production of its NovaLake CPU and GPU chips to TSMC using 2nm technology reflects high industry recognition of TSMC's advanced manufacturing capabilities [6]. - TSMC is poised to capture a share of the AI GPU market in mainland China, particularly if NVIDIA secures export licenses for its B30 chips, with a potential demand of 500,000 units [6]. Group 5: Industry Trends and Pricing Strategy - The semiconductor industry's inventory levels are declining, indicating a potential recovery in non-AI semiconductor demand [7]. - TSMC plans to increase wafer prices by 3-5% globally in 2026, with potential increases exceeding 10% at its US facilities, which may help mitigate gross margin pressures from currency appreciation [7]. Group 6: Capital Expenditure and Production Plans - TSMC plans to maintain a capital expenditure level of $40 billion in 2026, primarily to expand 2nm capacity to 90,000 wafers per month [9]. - The investment strategy reflects a balance between meeting future market demand and maintaining financial discipline, contrasting with the high volatility of capital expenditure cycles in the semiconductor industry [9]. Group 7: Key Issues Impacting Investor Confidence - Four key issues will significantly influence investor confidence in TSMC by 2026: growth in AI semiconductor business, uncertainty regarding Intel's outsourcing scale, the total addressable market for AI GPUs in mainland China, and TSMC's wafer pricing strategy [11][12]. - Successful implementation of a 3-5% price increase globally will be crucial for TSMC to offset rising costs and currency impacts [12]. Group 8: Geopolitical Risk Management - TSMC's $165 billion investment in the US enhances its ability to address geopolitical risks, particularly concerning semiconductor tariffs [15]. - If TSMC can secure exemptions for equipment and chemical imports, it may maintain a long-term gross margin above 53%, which is vital for its profitability [15].

Core Viewpoint - TSMC has achieved a significant milestone with its 2nm process technology, boasting a yield rate exceeding 60%, which highlights its technological leadership in advanced semiconductor manufacturing [1][2]. Group 1: TSMC's 2nm Process - TSMC's 2nm process utilizes GAA (Gate-All-Around) technology, which is expected to improve energy efficiency by 10% to 15% and reduce power consumption by 25% to 30% [1]. - The chip density of TSMC's 2nm process is projected to be 15% higher than the current 3nm process [1]. - Major clients for TSMC's 2nm technology include Apple, NVIDIA, AMD, Qualcomm, and MediaTek, with AMD's next-generation EPYC Venice server CPU confirmed to use TSMC's 2nm process [1]. Group 2: Samsung's 2nm Efforts - Samsung is actively working on its 2nm process and plans to start production in the second half of the year, with speculation that it may be for the Exynos 2600 processor for the Galaxy S26 flagship phone [2]. - Despite Samsung's efforts to catch up, TSMC maintains a solid lead in the 2nm process technology [2].

Core Viewpoint - Huawei has applied for a "quad-chiplet" packaging design patent, potentially for next-generation AI chips, which may allow it to compete with TSMC and NVIDIA in the AI GPU market [2][4]. Group 1: Patent and Technology Development - The "quad-chiplet" design is similar to NVIDIA's Rubin Ultra architecture, but Huawei appears to be developing its own advanced packaging technology [4]. - The patent indicates a bridging technology, akin to TSMC's CoWoS-L, rather than a simple intermediate layer [4]. - To meet the demands of AI training processors, the chips are expected to be paired with multiple HBM (High Bandwidth Memory) through interconnections [4]. Group 2: Competitive Positioning - Although Huawei currently lags in advanced process technology by one generation, its advanced packaging capabilities may be on par with TSMC [4]. - This advancement allows Chinese manufacturers to use mature process technologies to produce multiple chips, which can then be integrated through packaging to enhance performance, potentially narrowing the gap with advanced process chips [4]. - Ren Zhengfei, Huawei's founder, has stated that concerns over chip technology are unwarranted, suggesting that methods like stacking and clustering can yield results comparable to the most advanced levels [4].