Taiwan Semiconductor's growth and valuation make the stock look cheap At the start of 2025, management gave a bold prediction that AI-related revenue would grow at a 45% compound annual growth rate (CAGR) over the next five years, with overall revenue increasing at a 20% CAGR. That's market-crushing growth, yet TSMC's stock trades at about the same valuation as the broader market. Taiwan Semiconductor Manufacturing is one of the top AI companies to invest in right now. Artificial intelligence (AI) stocks co ...

Summary of Key Takeaways from APAC's OCP Summit Industry Overview - The report focuses on the AI server development industry, particularly the challenges and innovations discussed at the APAC's Open Compute Project (OCP) Summit held in Taipei on August 5-6, 2025. Core Points and Arguments 1. **AI Datacenter Clusters and Power Innovations**: Current large-scale datacenters consume between 50-100MW and are not fully compliant with AI server hosting standards. Companies like Meta are planning to build Titan AI clusters, with the first 1GW+ AI datacenter (Prometheus) expected to be operational by 2026. Another datacenter, Hyperion, will have a capacity of up to 5GW. Key beneficiaries include Delta, Vertiv, and power plant vendors [1][12][31]. 2. **Capex Increase for US CSPs**: The top four US Cloud Service Providers (CSPs) are expected to increase their capital expenditures (Capex) by 55% and 25% year-over-year in 2025 and 2026, respectively, indicating a robust multi-year investment in AI infrastructure [1][12]. 3. **Modular Design Trends**: The DC-MHS (Datacenter Modular Hardware System) is gaining traction as a modularized computing platform that enhances scalability and cost efficiency. Intel is a key player in this trend, which is expected to see high adoption rates starting with its next-generation server platform [9][12]. 4. **Customized Liquid Cooling Solutions**: There is a rising demand for customized liquid cooling solutions among the top four US CSPs. Amazon is shifting to its proprietary thermal solution, IRHX, while Google is developing a customized L2L CDU design. Delta is identified as a key ODM for these solutions [12][31]. 5. **HVDC Power Technologies**: The report discusses bifurcated HVDC (High Voltage Direct Current) power technologies, with a focus on the ±400V architecture being more favorable due to its compatibility with existing datacenter practices. This shift could benefit suppliers of SiC or GaN components [18][21]. 6. **Increased Content in Power Rack Designs**: CSPs are expected to introduce side power rack designs to accommodate higher power density. This will lead to significant content increases for system vendors like Delta, as the complexity of power delivery systems rises [21][23]. 7. **Vertical Power Delivery Adoption**: Vertical power delivery is anticipated to become more common in next-generation AI accelerators, driven by the need for power efficiency. This trend is expected to benefit power vendors like Delta and Infineon [29][31]. 8. **Networking Equipment Upgrades**: The demand for high-end networking equipment is increasing due to the growth of AI clusters. Ethernet technologies are being explored as alternatives to Infiniband for scale-up networking solutions, which could benefit Ethernet switch vendors [31][32]. Other Important Insights - The introduction of OpenBMC and Caliptra is expected to enhance security in server designs without necessarily lowering entry barriers for BMC chip vendors [7][12]. - The report highlights the importance of customized solutions in the evolving landscape of AI server infrastructure, indicating a shift towards more tailored approaches in hardware design and cooling solutions [12][31]. This summary encapsulates the key insights and trends discussed at the OCP Summit, emphasizing the ongoing innovations and investment opportunities within the AI server development industry.

Financial Position - As of June 30, 2025, total assets reached NT$7,006,349,549, an increase from NT$6,691,938,000 in December 2024, representing a growth of 4.7%[10] - Current assets amounted to NT$3,264,917,475, accounting for 47% of total assets, compared to 46% in December 2024[10] - Total liabilities were NT$2,389,717,699, which is 34% of total assets, slightly up from 35% in December 2024[10] - Equity attributable to shareholders of the parent increased to NT$4,581,073,975, representing 65% of total equity, compared to 64% in December 2024[10] - Cash and cash equivalents rose to NT$2,364,524,340, making up 34% of total assets, up from 32% in December 2024[10] - Long-term liabilities decreased to NT$1,012,403,365, representing 14% of total liabilities, down from 16% in December 2024[10] - Total current liabilities increased to NT$1,377,314,334, which is 20% of total liabilities, compared to 19% in December 2024[10] - Non-controlling interests rose to NT$35,557,875, representing 1% of total equity, compared to 1% in December 2024[10] Revenue and Profitability - Net revenue for Q2 2025 reached NT$933.79 billion, a 38.7% increase from NT$673.51 billion in Q2 2024[12] - Gross profit margin improved to 59% in Q2 2025, compared to 53% in Q2 2024, with gross profit amounting to NT$547.37 billion[12] - Operating expenses totaled NT$84.51 billion in Q2 2025, representing 9% of net revenue, up from 10% in Q2 2024[12] - Income from operations for Q2 2025 was NT$463.42 billion, a 62% increase from NT$286.56 billion in Q2 2024[12] - Net income for Q2 2025 was NT$397.49 billion, a 60.5% increase compared to NT$247.66 billion in Q2 2024[12] - Earnings per share for Q2 2025 were NT$15.36, up from NT$9.56 in Q2 2024[12] - Total comprehensive income attributable to shareholders for Q2 2025 was NT$146.20 billion, a decrease from NT$262.27 billion in Q2 2024[12] Cash Flow and Investments - Cash generated from operations for the first half of 2025 was NT$1,251,521,280, compared to NT$903,133,764 in 2024, indicating a year-over-year increase of about 38.6%[18] - The net cash used in investing activities for the six months ended June 30, 2025, was NT$518,680,733, up from NT$357,414,321 in 2024, reflecting an increase of approximately 45%[19] - The net cash used in financing activities for the same period was NT$204,366,193, compared to NT$161,930,200 in 2024, which is an increase of about 26%[19] - The cash and cash equivalents at the end of the period were NT$2,364,524,340, compared to NT$1,799,127,351 at the end of June 2024, showing a growth of approximately 31.4%[20] Expenses and Losses - Research and development expenses for Q2 2025 were NT$61.28 billion, maintaining 7% of net revenue[12] - The company reported a foreign exchange loss of NT$4.78 billion in Q2 2025, compared to a gain of NT$2.18 billion in Q2 2024[12] - The income tax expense for Q2 2025 was NT$95.54 billion, representing 10% of income before tax, compared to 8% in Q2 2024[12] - The company recognized earthquake losses of approximately NT$5.3 billion in Q1 2025, primarily affecting inventories and machinery[185] Shareholder Returns - Cash dividends to shareholders amounted to NT$246,360,378, representing a substantial return to investors[14] - TSMC's cash dividends per share for the second quarter of 2025 are NT$5.00, with total cash dividends to shareholders amounting to NT$129,662,913,000[102] Financial Assets and Liabilities - The company reported financial assets at fair value through profit or loss totaling $15,597,401 as of June 30, 2025, up from $15,407,542 at the end of 2024, indicating a slight increase of 1.2%[43] - The total financial liabilities at fair value through profit or loss (FVTPL) include forward exchange contracts valued at $220,702 and interest rate futures contracts at $2,384[162] - The total balance of bonds payable decreased to $940,825,442 as of June 30, 2025, from $983,752,385 at the beginning of the year[134] - Financial assets at amortized costs totaled $2,888,647,577 as of June 30, 2025, an increase from $2,721,319,255 at the end of 2024[135] Related Party Transactions - TSMC's receivables from related parties also exceeded NT$100 million or 20% of paid-in capital, indicating substantial intercompany transactions[195] - Total receivables from related parties as of June 30, 2025, amounted to $2,277,792, up from $1,404,473 in 2024, representing a 62.1% increase[178] Market and Segment Performance - Wafer revenue for the three months ended June 30, 2025, reached $795,434,048, up 33% from $596,240,620 in Q2 2024[107] - Revenue from High Performance Computing for the six months ended June 30, 2025, was $1,054,378,499, a 68% increase compared to $626,165,504 in the same period of 2024[107] - The revenue from the United States for the six months ended June 30, 2025, was $1,326,650,754, a significant increase from $812,949,006 in the same period of 2024[106] Accounting and Compliance - The company is evaluating the impacts of new IFRS standards, including IFRS 18, which will supersede IAS 1, effective January 1, 2027[27] - TSMC's pension cost for the interim period is calculated using the actuarially determined pension cost rate from the previous financial year[39] - The company continues to apply the same material accounting judgments and key sources of estimates as in the previous financial year ended December 31, 2024[41]

The following is a conversation with Ku Jin, an economist at the London School of Economics specializing in China's economy, international macroeconomics, global trade imbalances, and financial policy. She wrote the highly lauded book on China titled The New China Playbook: Beyond Socialism and Capitalism that details China's economic transformation since 1978 to Today. and it dispels a lot of misconceptions about China's economy that people in the west have. This is the Lex Freedman podcast. To support it, ...

Key Takeaways Taiwan Semiconductor Manufacturing Company (TSM) is advancing its nanosheet chip technology roadmap with N2, N2P, A16, and A14 with the aim of improving performance and efficiency at advanced nodes. The N2 logic node is Taiwan Semiconductor's first generation of nanosheet transistor technology, offering 10- 15% speed improvement at the same power, or 25-30% power reduction at the same speed, plus more than 15% chip density gain over N3E. Volume production is on track for the second half of 202 ...

Summary of Key Points from the Conference Call Industry Overview - **Industry Focus**: Greater China Technology Semiconductors and Technology Hardware [4][8] - **Market Sentiment**: The semiconductor industry in Greater China is viewed as attractive, with potential growth opportunities driven by new policies and technological advancements [4][8] Core Insights - **Semiconductor Tariffs**: Discussion on the implications of Section 232 tariffs and how they may impact companies within the semiconductor sector [6] - **Company Exposure**: - TSMC has a 75% revenue exposure to US customers and plans a US$165 billion capital expenditure for its US operations by 2030 [7] - GlobalWafers has a 30-40% exposure and has initiated operations in Texas with an additional US$4 billion investment planned [7] - ASE and UMC have varying levels of exposure, with ASE at 50% and UMC at 20% [7] - **Investment Plans**: Companies like ASE and its subsidiary SPIL are planning investments in the US, although details are yet to be announced [7] Financial Performance Highlights - **Lenovo's Financials**: - Projected net sales for FY-1Q26E are US$18.081 billion, reflecting a 6% quarter-over-quarter increase and a 17% year-over-year increase [15] - Operating income is expected to rise significantly by 97% year-over-year to US$653 million [15] - Net income is projected to increase by 327% year-over-year to US$384 million [15] - **Margins**: Lenovo's gross margin is expected to be 16.1%, with operating margin at 3.6% [15] Emerging Trends - **AI Demand**: There is a notable increase in demand for AI-related device testers, with firms like Advantest expecting continued growth in System on Chip (SoC) tester demand [10] - **E-Paper Growth**: E Ink is projected to experience a 19% revenue CAGR from 2024 to 2026, driven by opportunities in signage and consumer electronics [18][22] Risks and Considerations - **Market Risks**: - Potential oversupply issues in mature node foundries could impact companies like UMC and Powerchip [7] - The semiconductor market faces uncertainties due to fluctuating demand and geopolitical factors [35][38] - **Investment Risks**: Risks to upside include stronger-than-expected recovery in semiconductor demand, while risks to downside involve potential market share loss and declining gross margins [37][38] Additional Insights - **Strategic Acquisitions**: Lenovo is in the process of acquiring Infinidat Ltd., indicating a strategic move to enhance its capabilities [31] - **Buyback Programs**: Companies like Ushio are implementing share buyback programs, reflecting confidence in their financial health [11] This summary encapsulates the key points discussed in the conference call, highlighting the current state and future outlook of the semiconductor and technology hardware industries in Greater China.

Core Viewpoint - Taiwan Semiconductor Manufacturing (TSM) is positioned as a long-term investment opportunity due to its significant market presence and upcoming expansion in the U.S. semiconductor manufacturing sector, driven by new trade tariffs [2][3][5]. Company Overview - TSM has a current stock price of $241.98, with a 52-week range of $134.25 to $248.28 and a dividend yield of 1.02% [2]. - The company has a market value of approximately $1 trillion and a P/E ratio of 27.59, which is lower than the computer sector's average of 50.3 [3][10]. Investment Thesis - The stock is recommended for long-term accumulation, with a price target of $258.33, indicating a potential upside of 6.76% from the current price [11]. - The anticipated increase in tariffs on semiconductors, potentially reaching 200% by 2027, provides a timeline for TSM to enhance its manufacturing capacity in the U.S. [5][12]. Market Position and Performance - TSM is a dominant player in the semiconductor industry, supplying major companies like NVIDIA and Apple [6][7]. - Recent quarterly earnings reported an EPS of $2.47, surpassing the Wall Street consensus of $2.13, suggesting that analysts may be undervaluing the company [13]. Analyst Sentiment - Despite some institutional investors reducing their positions, this is not necessarily a bearish signal but rather a portfolio management strategy [8][9]. - TSM is currently rated as a "Buy" among analysts, although some top-rated analysts have identified other stocks as better buys [15][16].

Summary of Key Points from the Conference Call Industry Overview - The conference call primarily discusses the **semiconductor industry** and its implications due to the **Sec 232 tariffs** announced by President Trump, which could affect major tech companies and their supply chains. Core Insights and Arguments 1. **Tariff Exemptions for Major Investments**: Companies that have announced significant investments in the US, such as Apple ($600 billion), TSMC ($165 billion), and NVDA ($500 billion), are likely to be exempt from the new semiconductor tariffs, which are expected to be around 100% [3][5] 2. **Impact on Smaller Supply Chains**: Smaller vendors, such as tier-2 foundries and PC brands, may face more challenges and could be more vulnerable to the tariffs due to their inability to announce large investments [3][4] 3. **Potential for Minimal Tariff Impact**: The effective tariff rates for major tech and semiconductor products may end up being much lower than the stated rates due to exemptions for large supply chains, which could lead to a positive outlook for global tech stocks, especially in Taiwan [3][5] 4. **Apple's Position in India**: Apple is likely to be exempt from the new tariffs on exports from India, which is beneficial for its supply chain as it continues to migrate operations to India [5] 5. **NVDA's AI GPUs and China**: NVDA has indicated that its AI GPUs do not contain backdoors, which may facilitate the resumption of shipments to China, positively impacting Chinese AI datacenter stocks [5] 6. **Resurgence of Tech Trade**: Following the initial concerns regarding tariffs, the Asian tech stock market is expected to rally again, driven by strong demand for AI technologies [5] Additional Important Information 1. **Investment Announcements**: A detailed table lists various companies and their announced investments in the US, highlighting significant commitments from firms like Samsung ($40 billion) and SK Hynix ($4 billion) [6] 2. **Analyst Recommendations**: The report includes a list of top picks for investment, such as TSMC, Delta, and Hon Hai, while advising against companies like MediaTek and Xiaomi [5][8] 3. **Market Sentiment**: The overall sentiment in the semiconductor sector is cautiously optimistic, with expectations that the tariff implications are less severe than initially feared [5] This summary encapsulates the critical points discussed in the conference call, focusing on the semiconductor industry's response to new tariffs and the implications for major players within the sector.

Summary of Key Points from the OCP APAC Summit Industry Overview - The Open Compute Project (OCP) is an industry consortium focused on redesigning hardware technology for data centers, emphasizing efficiency, scalability, and openness. It has over 400 members as of 2025, initiated by Meta in 2011 [3][2]. Core Insights and Arguments AI Data Center Innovations - The OCP APAC Summit highlighted advancements in AI hardware, infrastructure, and networking, with participation from major tech companies like Google, Meta, Microsoft, TSMC, and AMD [2][7]. - Meta is aggressively launching its Hyperion data center, which is expected to significantly benefit server ODMs like Quanta and Wiwynn [4][29]. - AMD's UALink and Ultra Ethernet are set to enhance networking capabilities, enabling larger clusters and improved performance [9][11]. Power and Cooling Solutions - The power consumption of AI servers is projected to double, with NVIDIA's GPUs expected to reach 3,600W by 2027, necessitating a shift to high-voltage direct current (HVDC) systems for efficiency [23][24]. - Liquid cooling is becoming essential for managing the thermal load of high-density AI racks, with designs evolving to accommodate this need [34][23]. Market Dynamics - The AI hardware market is transitioning from proprietary solutions to a more open, collaborative environment, benefiting specialized hardware vendors [10][11]. - The back-end networking market for AI is projected to exceed $30 billion by 2028, driven by the demand for high-bandwidth communication within AI clusters [18]. Important but Overlooked Content - The shift to panel-level processing by ASE is a critical innovation for manufacturing larger AI packages, improving area utilization and cost-effectiveness [13]. - The integration of retimers in cables is essential for maintaining signal integrity in high-density AI racks, addressing challenges posed by traditional passive copper cables [18]. - MediaTek is positioning itself as a leader in on-device AI integration, which is crucial as the demand for edge computing grows [26][30]. Company-Specific Highlights - **Delta**: Target price raised from $460 to $715 due to strong growth momentum driven by AI power needs [21]. - **Google**: Engaging with OCP to upgrade AI infrastructure, including the introduction of the Mt. Diablo power rack for efficient power distribution [24][33]. - **Seagate**: Emphasized the complementary role of HDDs alongside SSDs for high-capacity storage in AI applications [39][41]. - **TSMC**: Focused on co-development of system-level standards to support higher performance compute systems [40]. Conclusion The OCP APAC Summit underscored the rapid evolution of AI infrastructure, highlighting the importance of collaboration among tech giants to address the challenges of power, cooling, and networking in data centers. The insights gained from this event will shape the future landscape of AI technology and its supporting ecosystem.

Strategic Shift - Tesla reportedly changed its course, halting the DOJO project and disbanding the team, shifting focus to TSMC's upcoming AI5 chips and potentially Samsung's AI6 chips [1] - The $16+ billion special agreement with Samsung, turning the chip fabrication facility near Giga Texas into a Tesla-dedicated facility with direct oversight by Elon Musk, gains significance [1] Giga Texas Implications - Questions arise regarding the impact of this decision on the massive infrastructure upgrades and the Cortex 2 facility at Giga Texas [1] - Uncertainty surrounds the repurposing of the new Cortex 2 facility and the ongoing work on Cortex 1.0 in the S factory extension [1] Future Outlook - New permits for continued work have been filed with the City of Austin, indicating potential continuation of some projects [1] - The industry is curious about potential changes, work stoppages, or other developments resulting from this decision [1]