URGENT: What TSMC Just Revealed About NVIDIA (Broadcom Too)
Wall Street has no idea what is going on. But if you just connect the dots, it's simple.
Taiwan Semiconductor just reported Q4 earnings.
And it revealed many things about Nvidia, Broadcom, AMD, Intel and even Apple.
Let’s start with the high level overview:
High Performance Computing (HPC) Revenue
Up 19% Quarter over Quarter (Q/Q)
Up 58% Year over Year (Y/Y)
HPC is essentially Nvidia demand, but will also include some AMD and others.
In recent days there have been rumors floated about Nvidia demand slipping.
If you read our newsletter earlier this month … you would have known this is utter nonsense.
Keep in mind we haven’t heard from Amazon, Google or Meta yet on CapEx spending … but if Microsoft is spending $80B - it gives you a good idea where those companies will come in.
Also … and this is a key point.
When we’re talking about demand for Nvidia (and Broadcom) products … it’s NOT a consumer driven market.
Businesses that rely on discretionary consumer spending SUCK right now.
Pull up the chart of Nike, Pepsi, Levi’s etc.
This is going to present an opportunity later on, but we’ll turn that stone over later.
Nvidia’s customers have cash to burn.
So much so, that the only thing these companies have spent significant chunks of money on over the past decade has been buying back their own stock.
So when your favorite perma-bear influencer is telling you AI stocks are in a bubble and it’s going to crash …
Understand Google, Meta, Amazon, Apple, Microsoft can blow $400B on AI and it not really be a big deal financially.
This is showing up in the results of TSMC.
In fact, analysts asked TSMC management about the potential fall off of demand from Nvidia and here’s what they said:
We are working very hard to meet the requirement of my customers' demand. So cut the order, that won't happen. Actually continue to increase.
So there you have it. Nvidia’s demand isn’t slowing down …
IT’S ACCELERATING
And it all makes sense.
When Microsoft gets on a conference call, they explain that demand for AI service on Azure (its cloud computing division) exceeds demand.
Andy Jassey, the CEO of Amazon, tells investors that AI demand is growing faster than AWS demand did when it first launched.
Executives at Meta and Salesforce have recently said they don’t need to hire (very expensive) software engineers (coders) because AI is helping the existing ones work that much faster.
Mark Zuckerberg even went as far to say that Meta won’t need any coders at some point.
ONLY AN ABSOLUTE IDIOT WOULD PULL BACK ON AI SPENDING BASED ON THIS EVIDENCE.
The thing to always remind yourself about AI is that the common, everyday person is not using it.
My mom isn’t going to use ChatGPT to plan her next vacation.
But the airlines will use it to help reduce fuel costs. Hotel booking engines will use it to serve up room rate suggestions. And a translation application will use AI to allow my mom to communicate in the foreign countries she visits.
The use cases are accelerating. Which is exactly why demand for Nvidia is not slowing down, in fact … it’s accelerating.
Where we are seeing weakness in the chip market is on the consumer facing devices like smartphone, PC and tablets.
In Q4 smartphone related revenue at TSMC was down 23% year/year.
In Q1 TSMC is expecting smartphone revenue to decline another 5.5% whereas HPC (Nvidia) demand is expected to rise over 34%.
The bottom line:
Consumer facing companies have customers who are paying $12/dozen for eggs, $1800/mo for rent and it’s chewing up all the gains they might see in wage gains.
That’s why sales of the Apple iPhone are basically going nowhere and sales at Nike are in the tank.
This will also trickle over to chip makers like AMD, Intel, Qualcomm who have a much larger reliance on the consumer buying their stuff.
Meanwhile, the business community has spent the past 24 months laying off workers and using AI to drive efficiencies - so they can afford to buy Nvidia’s GPUs.
This will benefit B2B chip makers, largely Broadcom and Nvidia.
I stand by my call (back in October) that Nvidia will likely come towards the high end revenue estimates for 2025.
Parts of Wall Street still misunderstand what is happening, mainly because they are trying to compare the discretionary consumer market to what trillion dollar companies are spending money on.
That’s like comparing my athletic ability to an olympian. Stupid.
Some bonus notes before you roll …
Check out my video on 2 stocks that will benefit alongside Nvidia. Many investing newsletters have been pumping Micron because of HBM demand. But Micron consistently underperforms, and I have a better way to play upside in HBM demand.
Also, if you’re not following me on social media. I’ve been posting short trade alerts. These will be the same trade alerts you will get when we launch our paid services soon.
Here are the results from my own personal brokerage account:
Merk MRK +2.04%
XLB +4.94%
Pepsi -3.2%
CMG +1.62%
NXPI +2.88%
MCD -0.21%
Honeywell +2.31%
Find the trade alerts here: https://www.youtube.com/@EquityEmpireResearch/shorts
Obvious disclaimers apply. Past results don’t mean jack shit about future performance and results may vary.
But my goal with the new service will be to help you generate income from blue chip stocks both on the long side and the shorter term trade side. All using methods that have worked for me.
Hope you enjoyed this one … I’ll be back this weekend to recap bank earnings, lot of lessons to be learned there. Until then, have a good week.
Colin
You brought Celestica to my attention a few months back. I started a position with Camtek today !
Thanks Colin, I'm in these trades along with you brother! Good luck