NVIDIA (NVDA), experiencing rapid expansion in the artificial intelligence sector, is projected to become one of Taiwan Semiconductor Manufacturing Co.'s (TSMC) principal clients, rivaling the importance of Apple (AAPL). According to Bernstein, while Apple remains significant, NVIDIA's contribution to TSMC's revenue is expected to rise from 5-10% in 2023 to around 20% by 2025, aligning with Apple's share.
This growth is attributed to TSMC's strong performance in AI and backend operations, including advanced packaging technology. AI is predicted to exceed 20% of TSMC's total revenue this year. TSMC plans to maintain full production capacity while adapting to changes in NVIDIA's Blackwell, Blackwell Ultra, and Rubin chip production schedules. Bernstein forecasts a 40% increase in TSMC's earnings per share this year, with data center AI revenue growing from 6% of total revenue in 2023 to 14% in 2024, and over 20% by 2025.
Though NVIDIA's GPU business remains dominant, accounting for two-thirds of TSMC's AI-related demand, Bernstein notes a long-term trend toward ASIC chips, driven by Amazon (AMZN) and Google (GOOGL). TSMC's influence in backend services is expected to surpass ASE Technology Holding Co Ltd, making it the largest outsourced semiconductor assembly and test (OSAT) supplier globally this year. Bernstein maintains an "outperform" rating for TSMC, with a target price of NT$1,430, implying a 30% upside potential.
