At a Glance
- TSMC reported a 16.9% revenue increase in October, the lowest monthly growth since February 2024, sparking concerns about AI chip demand potentially cooling.
- Despite a recent tech stock sell-off and bearish bets from investors like Michael Burry, major tech companies are significantly increasing AI infrastructure investments.
- Nvidia CEO Jensen Huang met with TSMC leadership to secure more chip supply, highlighting ongoing demand that outstrips current production capacity.
- Geopolitical tensions and U.S. export restrictions are impacting Nvidia’s ability to sell high-end chips in China, prompting acceleration of local AI chip development.
TSMC’s October Revenue Growth Slows Amidst AI Chip Demand Scrutiny
The Taiwan Semiconductor Manufacturing Company (TSMC) recently announced a 16.9% year-over-year revenue increase for October. This figure represents the slowest monthly growth observed since February 2024. This deceleration has introduced fresh concerns regarding the sustained demand for artificial intelligence chips. While analysts still project a 27.4% growth for the current quarter, TSMC’s stock performance, up 37% year-to-date, suggests investor optimism had largely prevailed until this latest report.
💡 This development comes shortly after a period where investors offloaded technology shares due to fears of inflated valuations. Prominent Wall Street figures had flagged the possibility of an impending market correction.
Among these cautious voices was Michael Burry, whose Scion Asset Management disclosed bearish positions against Nvidia, a leading player in the AI chip market. Despite these warnings, the industry continues to channel substantial investments into AI infrastructure.
Major Tech Giants Ramp Up AI Investments
Companies such as Meta, Amazon, Microsoft, and Alphabet are collectively planning to invest over $400 billion in AI infrastructure by 2026. This represents a significant 21% increase from their current year’s expenditure, underscoring their commitment to maintaining a competitive edge in the AI sector.
Huang Urges TSMC for Increased Chip Production in Taiwan
Jensen Huang, the CEO of Nvidia, recently held discussions with TSMC’s chief, C.C. Wei, during a two-day visit to Taiwan. Huang expressed a need for increased chip supply, stating that Nvidia was experiencing continuous and robust growth. The visit occurred at a time when demand for advanced chips is outstripping supply, with major chip designers actively seeking production slots at TSMC’s facilities in Hsinchu.
📊 TSMC’s C.C. Wei informed analysts last month that capacity remains constrained, and the company is actively working to balance supply and demand dynamics.
Nvidia’s competitors, including AMD and Qualcomm, also rely on TSMC for their manufacturing needs. Furthermore, TSMC produces custom chips for Apple, notably the silicon powering iPhones and other Apple hardware.
Cristiano Amon, CEO of Qualcomm, recently commented on Bloomberg TV, suggesting that the long-term significance of AI is still underestimated by many.
Nvidia Faces China Market Challenges Amidst Growing Tensions
Jensen Huang’s visit to Taiwan also coincided with significant discourse surrounding the U.S.-China AI rivalry. Huang had previously remarked that China possesses certain advantages, such as lower energy costs and more streamlined regulations, which could contribute to its progress in the AI sector. He later clarified these remarks, emphasizing that his comments were intended to acknowledge China’s existing strengths in the field.
⚡ In Tainan more recently, Huang clarified Nvidia’s position on supplying its advanced Blackwell chips to China, stating, There are no active discussions. Currently, we’re not planning to ship anything to China. While Huang has previously indicated a desire to expand Nvidia’s business operations in China, escalating tensions between the U.S. and Chinese governments have presented significant obstacles.
💡 Previous reports suggested that former President Donald Trump had considered raising the Nvidia-China issue during a meeting with Chinese President Xi Jinping in October, though this topic was ultimately not discussed.
The U.S. government has permitted Nvidia to sell its H20 chips, a less advanced version, to Chinese customers. However, Beijing has reportedly encouraged domestic firms to prioritize local chip alternatives over foreign imports.
Companies like Huawei and Cambricon are reportedly receiving state support to accelerate the development of their own AI processors, reflecting China’s strategic aim to reduce reliance on American technology.
Huang has cautioned that U.S. export control policies could inadvertently benefit Chinese companies by encouraging them to expedite the development of their own competing AI chip technologies.
“It’s up to China when they would like Nvidia products to go back to serve the Chinese market,” he stated. “I look forward to them changing their policy.”
Final Thoughts
The recent slowdown in TSMC’s monthly revenue growth highlights potential shifts in the AI chip market, even as major tech players continue to invest heavily. Geopolitical factors are increasingly influencing supply chains and market access, particularly for companies like Nvidia operating between the U.S. and China.
