ByteDance + Broadcom = The future of Chinese AI chips—But there’s a twist… 🧐

ByteDance, the parent company of TikTok, is partnering with Broadcom to develop an advanced AI chip, a strategic move aimed at securing a stable supply of high-end semiconductors amid ongoing U.S.-China tech tensions. The chip, a 5-nanometer application-specific integrated circuit (ASIC), will be manufactured by Taiwan Semiconductor Manufacturing Company (TSMC) and is designed to comply with U.S. export restrictions. While the design is progressing, manufacturing is not expected to begin until next year, delaying the chip’s availability. This collaboration highlights ByteDance’s efforts to bolster its AI capabilities despite challenges posed by U.S. sanctions on China’s access to advanced technology.

The 5-Nanometer AI Chip: Key Details and Development Process

At the heart of this collaboration is the development of a 5-nanometer application-specific integrated circuit (ASIC). This advanced AI chip is designed to meet the increasing demands of ByteDance’s expansive portfolio, which includes popular applications like TikTok and Douyin. To ensure the chip’s compliance with existing U.S. export regulations, ByteDance has chosen to partner with Taiwan Semiconductor Manufacturing Company (TSMC) for its manufacturing. TSMC’s involvement is crucial, as it allows ByteDance to move forward with chip development without violating any international trade restrictions.

TSMC’s Role and the Timeline for Chip Production

Although the partnership with TSMC is a significant milestone for ByteDance, the actual production of the AI chip is not expected to commence this year. The chip is still in the design phase, with the “tapeout” process, which transitions the design to the manufacturing stage, yet to begin. As a result, while the design work is progressing, the manufacturing phase is anticipated to start sometime next year. This delay in production underscores the challenges ByteDance faces in bringing this advanced AI chip to market, even as it continues to push the boundaries of its technological capabilities.

TSM Technical Analysis (daily)

This chart for Taiwan Semiconductor ADR (TSM) on the daily timeframe shows a generally upward trend over the past few months, though with some significant fluctuations. The stock is currently trading at $171.28, above the 200-day moving average (red line) at $139.24 and the 50-day moving average (blue line) at $174.20. The 50-day moving average is acting as a resistance level, as the price has recently touched this line but has not yet broken above it. The support level is around $160, where the stock found support multiple times in recent months.

The Relative Strength IndexIn the world of technical analysis, the Relative Strength Index (RSI) stands as a cornerstone tool for traders seeking insights into market momentum. Developed by J. Welles Wilder ... More (RSI) is at 53.30, indicating neutral momentum with no clear overbought or oversold conditions. This suggests that the stock could move in either direction depending on market conditions.

The On-Balance VolumeThe On Balance Volume indicator (OBV) is a technical analysis tool used to measure the flow of money into and out of a security over a specified period of time. It is a cumulative ... More (OBV) shows a declining trend, indicating that despite price increases, volume is not confirming the upward movement, which could be a bearish sign.

The Stochastic RSIIn the realm of technical analysis, the Stochastic RSI (StochRSI) emerges as a powerful tool for traders seeking to navigate market dynamics with precision. Developed by Tushar S. ... More is at 0.791, suggesting that the stock is approaching overbought conditions but is not there yet. This could signal limited upside in the short term before a potential pullback.

The Chaikin OscillatorNamed after its creator Marc Chaikin, the Chaikin Oscillator stands as a formidable tool in the arsenal of technical analysts. This oscillator is designed to measure the accumulati... More is positive, showing buying pressure, though it’s not at an extreme level, indicating moderate bullishness.

The MACDThe MACD indicator is essentially a momentum indicator that shows the relationship between two different moving averages of price. The MACD is the difference between the 12-period ... More shows a bullish crossover, with the MACD line (blue) crossing above the signal line (orange), and the histogram turning positive. This is a bullish signal, suggesting that the stock could continue its upward momentum in the near term.

In terms of future trends, the overall signals are mixed but slightly leaning toward bullish. The stock is near a critical resistance level at the 50-day moving average, and if it breaks above this level, it could continue to rise. However, the declining OBV and neutral RSI suggest that there may be some weakness underlying the recent price increase. A failure to break above the 50-day moving average could lead to a pullback to the support level around $160.

Time-Frame Signals:

12 Months: Hold – Monitor for longer-term trends to develop, especially if the stock maintains above the 200-day moving average.

3 Months: Hold – Wait for a clearer breakout above the 50-day moving average or a pullback to a stronger support level.

6 Months: Buy – If the stock holds above the 200-day moving average, a bullish trend could develop.

TSM Technical Analysis (weekly)

This weekly chart for Taiwan Semiconductor ADR (TSM) shows a strong upward trend over the past year. The stock is currently trading at $171.28, above key moving averages: the 40-week exponential moving average (EMA) at $149.74 and the 150-week EMA at $115.93. The stock recently experienced a pullback from a high of around $180, but it remains above the 40-week EMA, which is acting as a support level.

Support levels are identified around $150 (near the 40-week EMA) and further down at $115 (near the 150-week EMA). Resistance is observed around $180, where the stock faced selling pressure recently.

Volume has remained steady, with notable spikes during price increases, indicating strong buying interest during those periods. The On-Balance Volume (OBV) is trending upwards, supporting the bullish momentum as accumulation appears to be ongoing.

In terms of future trends, the chart suggests a bullish outlook as long as the stock remains above the 40-week EMA. However, the recent pullback from $180 could suggest some consolidation or minor correction before potentially resuming its upward trajectory.

Time-Frame Signals:

• 1 Year: Buy – The stock is in a strong uptrend, with support at $150 and potential for further gains if it can break above $180.
• 2 Years: Hold – If the stock maintains its current trend above key support levels, the long-term outlook remains positive.
• 3 Years: Buy – The long-term trend appears favorable, with significant support at $115 and strong upward momentum.

Disclaimer: Past performance is not an indication of future results, and this analysis should not be considered as investment advice. Always conduct your own research and consider consulting with a financial advisor before making any investment decisions. 🧡

Navigating U.S. Sanctions and Semiconductor Access

ByteDance’s pursuit of this advanced AI chip comes in the context of stringent U.S. sanctions that have significantly restricted China’s access to the latest semiconductor technologies. Despite these challenges, ByteDance has been proactive in acquiring AI chips from other sources, including Nvidia’s A100 and H100 models, to strengthen its AI infrastructure. These acquisitions have been essential in maintaining the performance and innovation of ByteDance’s applications, but the development of a proprietary AI chip with Broadcom could offer a more sustainable and long-term solution.

The Strategic Importance of the Broadcom Partnership

The collaboration with Broadcom represents a pivotal moment for ByteDance as it seeks to enhance its technological arsenal while navigating the intricacies of international trade restrictions. By partnering with an established semiconductor leader like Broadcom, ByteDance aims to secure a stable supply of advanced chips, which are crucial for the continued growth and success of its AI-driven platforms. However, the extended timeline for the chip’s production highlights the ongoing challenges that ByteDance must overcome in the ever-evolving landscape of global technology and trade.

Insights

1. ByteDance is proactive in securing chip supplies amid geopolitical tensions.
2. The chip design adheres to U.S. export restrictions, showing strategic compliance.
3. Manufacturing delays could impact ByteDance’s technological timelines.

The Essence (80/20)The Origins and Evolution of the 80/20 Principle The Discovery by Vilfredo Pareto In 1897, Italian economist Vilfredo Pareto uncovered a striking pattern in his study of wealth and... More: ByteDance is focusing on securing a stable supply of advanced AI chips through a partnership with Broadcom, navigating U.S.-China tech tensions by ensuring compliance with U.S. export restrictions. The chip development is critical for maintaining ByteDance’s competitive edge in AI, particularly in applications like TikTok. However, production delays may affect the timeline for deploying these new technologies.

The Action Plan – What ByteDance Will Likely Do Next

• Continue to monitor the U.S.-China technology landscape to anticipate further restrictions or opportunities.
• Prepare contingency plans for possible delays in chip production to mitigate impact on AI-driven projects.
• Explore additional partnerships or alternative chip sources to diversify supply chains.

Blind Spot: The potential risks associated with over-reliance on specific suppliers, like TSMC, or the impact of further escalation in U.S.-China tensions on ByteDance’s operations may be underestimated.

AVGO Technical Analysis (daily)

This daily chart for Broadcom Ltd (AVGO) shows a generally upward trend over the past several months, with the stock currently trading at $166.36. The price is above both the 50-day moving average at $164.62 and the 200-day moving average at $133.77, indicating a bullish trend.

Support levels are identified around $164, near the 50-day moving average, and more robust support is at $134, near the 200-day moving average. Resistance is seen around $180, where the stock has faced selling pressure in the past.

The Relative Strength Index (RSI) is at 58.00, indicating moderate bullish momentum but not yet overbought, suggesting the stock has room to rise further before encountering overbought conditions.

The On-Balance Volume (OBV) is flat, indicating that the recent price movements lack strong volume confirmation, which could be a sign of potential weakness or hesitation in the trend.

The Stochastic RSI is at 0.907, which is close to overbought territory. This suggests that the stock might face a short-term pullback or consolidation before any further upward movement.

The Chaikin Oscillator is positive, indicating some buying pressure, though it’s not at an extreme level, which suggests moderate bullish sentiment.

The MACD shows a recent bullish crossover, with the MACD line (blue) crossing above the signal line (orange), and the histogram turning positive. This is a bullish signal, indicating potential for further gains.

In terms of future trends, the overall signals are moderately bullish. The stock is trending upward and is above key support levels. However, the lack of strong volume confirmation and the near-overbought Stochastic RSI suggest that a short-term pullback or consolidation could occur before any further significant upward movement.

Time-Frame Signals:

12 Months: Hold – Monitor the stock’s performance, especially around the $180 resistance level, to assess if it can break higher for longer-term gains.

3 Months: Buy – The stock is in an uptrend with positive momentum, though watch for a potential short-term pullback.

6 Months: Hold – If the stock remains above the 50-day and 200-day moving averages, the trend is likely to remain positive.

AVGO Technical Analysis (weekly)

This weekly chart for Broadcom Ltd (AVGO) shows a strong upward trend over the past few years. The stock is currently trading at $166.36, above key moving averages: the 40-week exponential moving average (EMA) at $141.22 and the 150-week EMA at $95.69. The price has recently pulled back from highs around $180, finding support near the 40-week EMA, which suggests this level around $141 is a strong support zone.

Support levels can be identified at $141, near the 40-week EMA, and further down at $95, near the 150-week EMA. Resistance is observed around $180, where the stock has faced selling pressure recently.

Volume shows consistent trading activity with significant spikes during price increases, indicating strong buying interest. The On-Balance Volume (OBV) is trending upward, which confirms the bullish momentum as accumulation appears to be ongoing.

In terms of future trends, the chart suggests a bullish outlook over the medium to long term, as the stock continues to trade above the 40-week EMA and has strong support at that level. The recent pullback could indicate some consolidation, but as long as the stock remains above $141, the long-term trend remains positive.

Time-Frame Signals:

• 1 Year: Buy – The stock is in a strong uptrend with solid support at $141, making it a good long-term investment.
• 2 Years: Buy – The longer-term trend is bullish, with the stock maintaining above key support levels, indicating potential for further gains.
• 3 Years: Hold – The stock’s long-term uptrend remains intact, but monitoring is advised, especially around key support levels.

Past performance is not an indication of future results, and this analysis should not be considered as investment advice. Always conduct your own research and consider consulting with a financial advisor before making any investment decisions. 🧡

Looking Ahead

ByteDance’s collaboration with Broadcom and TSMC marks a significant step forward in the company’s efforts to develop a proprietary AI chip. While the project faces delays and challenges, it underscores ByteDance’s commitment to advancing its technological capabilities amidst a backdrop of international trade tensions and semiconductor shortages. As the design phase continues, the tech world will be watching closely to see how this partnership shapes the future of AI development at ByteDance and impacts the broader technology landscape.