Core Insights - Nvidia faces significant challenges in maintaining its business in the Chinese market amid the strategic competition between the US and China, particularly regarding tariff negotiations [2] - The US government has fluctuated in its stance on Nvidia's H20 chip exports to China, initially imposing restrictions but later granting licenses for sales [2][3] - The easing of restrictions is linked to positive developments in US-China trade talks, which have led to a partial relaxation of AI chip export controls [2] Group 1: Nvidia's Business Dynamics - Nvidia and AMD have reportedly agreed to pay 15% of their revenue from chips sold to China to the US government in exchange for export licenses [3] - The Trump administration has allowed Nvidia to sell a simplified version of its next-generation AI chip, the Blackwell series, to China, which has sparked domestic criticism in the US [3] - Nvidia's sales of H20 chips to China are projected to generate approximately $23 billion in revenue by 2025, with AMD expected to contribute an additional $800 million [4] Group 2: Financial Implications - The US government is expected to receive over $3.6 billion from Nvidia and AMD combined, with Nvidia alone contributing more than $3.4 billion [5] - Nvidia's net profit margin for 2024 is estimated at 56%, suggesting that its net profit from H20 chip sales in China could exceed $12.8 billion in 2025, even after accounting for the revenue share to the US government [5] Group 3: Manufacturing and Investment Requirements - Nvidia's ability to sell advanced AI chips in China comes with conditions, including direct payments to the US government and significant investments in domestic manufacturing to create local jobs [4][6] - Nvidia has committed to collaborating with companies like TSMC and Foxconn to generate over $500 billion in AI infrastructure in the US over the next four years [6][7] Group 4: Strategic Balancing Act - Nvidia's CEO, Jensen Huang, emphasizes the need to maintain good relationships with both the US and Chinese governments, highlighting the company's global nature and the demand for its technology [8] - The US government's goal remains to maintain a generational gap in semiconductor technology between the US and China, which complicates Nvidia's ability to sell its most advanced AI chips to China [9] Group 5: Market Trends and Future Outlook - Despite the temporary easing of export controls, the long-term trend indicates a shift towards increased self-sufficiency in China's AI chip industry, with domestic chip production expected to rise significantly [10] - Nvidia's market share in China is projected to decline from 66% in 2024 to 54% in 2025, as domestic competitors like Huawei and Cambricon gain traction [10]

Core Viewpoint - TSMC's upcoming earnings report is expected to reflect a dual drive of "demand differentiation + technology premium," with Morgan Stanley setting a target price of NT$1,288, implying a 17.6% upside and maintaining a "buy" rating [1] Revenue Forecast - Morgan Stanley identifies three scenarios for TSMC's revenue growth in 2025: - A 5% quarter-on-quarter increase (over 30% year-on-year) could lead to an annual growth rate exceeding 30% - A 0-3% quarter-on-quarter increase (around 20% year-on-year) would result in a 20% annual growth rate - A 1-3% quarter-on-quarter decline would maintain the annual growth rate around 20% [1] - The demand structure in the semiconductor industry is highlighted, with strong demand for AI server chips contrasted against weak consumption in smartphones and PCs [1] Gross Margin Resilience - Morgan Stanley predicts a gross margin of 53%-58% for Q3, with a minimum of 53% even in a pessimistic scenario, supported by: - TSMC's strategy of "technology premium + capacity binding" with a 20%-25% price increase for 3nm processes compared to 5nm - Over 95% utilization of CoWoS advanced packaging capacity, leading to continued cost dilution [2] - There is a potential for wafer price increases in 2026 if AI demand remains strong, allowing TSMC to further solidify its profit margins [2] Demand Drivers - The upward risks for TSMC's performance are concentrated on three factors: - AI chip demand exceeding expectations, with current H100/H200 chip orders booked until 2026 - Intel's CPU outsourcing business accelerating from 2025-2027, expected to contribute 5%-8% to revenue growth - A recovery in the cryptocurrency market boosting ASIC chip production [3] - Downward risks include: - Ongoing inventory adjustments in consumer electronics until the end of 2025 - Slower-than-expected customer expansion for processes below 3nm - Overruns in operational costs for U.S./European factories [3] - TSMC's technological lead in advanced processes (20% lower yield than Samsung's 2nm) is emphasized as a core competitive advantage [3] Investment Focus - Investors are advised to monitor three key signals from TSMC's earnings call on July 17: - Whether the full-year revenue guidance is revised upwards to the 30% range - Clear statements regarding wafer pricing strategy for 2026 - Quantitative assessments of the sustainability of AI demand and the recovery pace of non-AI applications [4] - Positive developments in these areas could push TSMC's valuation above a 25x dynamic P/E ratio, while negative outcomes could signal a risk of falling to a 15x P/E ratio [4] - The impact of a 6% import tariff on TSMC's U.S. clients is noted, but the company's technological irreplaceability is expected to mitigate tariff impacts [4] Conclusion - TSMC's unique positioning as a bellwether for the semiconductor cycle and a beneficiary of the AI revolution is highlighted, with its performance elasticity serving as a key indicator of whether "technology premium can transcend cycles" [5] - For investors, understanding the key indicators from the earnings call may become crucial for semiconductor investment strategies in the second half of 2025 [6]