Why is nobody talking about Apple’s exclusive 2-nanometer chip deal with TSMC?

In a recent secret and undisclosed meeting, Apple’s Chief Operating Officer, Jeff Williams, reportedly visited TSMC’s CEO, C.C. Wei, to discuss an exclusive reservation of TSMC’s initial 2-nanometer production capacity. This strategic collaboration aims to bolster Apple’s competitive edge in the AI arena by enhancing its M-series chips. The move signifies Apple’s commitment to staying at the forefront of technology and innovation.

The Meeting Behind Closed Doors

The Taiwanese news outlet, Economic Daily, reported this secretive meeting, maintaining the anonymity of its sources. Such discretion is typical of Apple, known for its confidential negotiations with suppliers. The Cupertino-based tech giant’s focus on securing TSMC’s cutting-edge semiconductor technology underscores its dedication to innovation and performance enhancement.

Apple’s AI Aspirations

Apple’s foray into AI is not new. The company has been developing its own AI chips for data center servers, crucial for handling complex AI processing tasks beyond the capabilities of iPhones or iPads. With the anticipated launch of iOS 18 this fall, which is expected to heavily incorporate AI models, Apple’s move towards AI integration becomes even more evident. This strategic direction is reminiscent of Android’s adoption of Gemini Nano.

Investment in AI Infrastructure

Luca Maestri, Apple’s Chief Financial Officer, confirmed that the company maintains its own data centers, essential for AI purposes. While Apple also utilizes third-party data centers, it continues to invest heavily in building its own infrastructure. Maestri revealed that Apple has invested over $100 billion in generative AI research and development over the past five years. This significant investment highlights Apple’s long-term commitment to AI innovation.

Advancing Chip Technology with TSMC

Currently, Apple employs TSMC’s 3-nanometer process for its M4 System-on-a-Chip (SoC), which features a powerful Neural Processing Unit (NPU). To further enhance its AI capabilities, Apple plans to develop three additional levels of the M4 SoC, codenamed Donan, Brava, and Hydra. These chips will provide increased AI processing power, enabling Apple to stay competitive in the rapidly evolving AI landscape.

Production and Financial Impact

The new M4 chips are expected to enter mass production in the latter half of 2024. By securing the first batch of TSMC’s 2-nanometer process, Apple ensures a technological edge that could significantly impact TSMC’s financial performance. This partnership has the potential to boost TSMC’s annual revenue to a record high of NT$600 billion (approximately USD $18.6 billion). Over time, Apple’s continuous business could help TSMC reach an annual revenue of NT$1 trillion (USD $31 billion).

Apple (AAPL) Technical Analysis

Price Action and Moving Averages

Current Price: $191.10
50-Day Moving Average (Blue Line): $176.09
200-Day Moving Average (Red Line): $182.18
Trend:

• The stock is currently in an upward trend, breaking above both the 50-day and 200-day moving averages.
• The 50-day moving average is starting to slope upwards, indicating potential continued strength in the short to mid-term.
• The stock recently crossed above the 200-day moving average, which is a bullish signal indicating a potential shift to a long-term uptrend.

Volume Analysis

• Volume: The volume spikes on upward moves indicate strong buying interest, especially during the recent price increase.

Relative Strength Index (RSI)

• Current RSIIn 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 Value: 72.33
• Interpretation:
• The RSI is above 70, which suggests the stock is in overbought territory. This could indicate a potential pullback or consolidation in the near term.

On-Balance Volume (OBV)

• Current OBVThe 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: 172,086,062
• Interpretation:
• The OBV line is trending upwards, indicating that the buying pressure is outweighing the selling pressure. This supports the bullish price action.

Stochastic RSI

• Current Value: 1.000
• Interpretation:
• 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 its maximum value, reinforcing the overbought condition indicated by the RSI. This further suggests that a pullback or consolidation could be imminent.

Average Directional Index (ADX)

• Current Value: 31.98
• Interpretation:
• The ADXThe Average Directional Index (ADX) stands as a cornerstone indicator in the toolkit of technical traders, offering insights into the strength of market trends. Developed by Welles... More value above 25 indicates that the current trend is strong. Since the stock is in an upward trend, this suggests strong bullish momentum.

Chaikin Oscillator

• Current Value: -9,054,655
• Interpretation:
• The negative 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 value suggests that there might be some distribution occurring. However, this is not a strong enough signal to contradict the overall bullish indicators.

Summary

3-Month Horizon: Hold

• Given the overbought conditions indicated by the RSI and Stochastic RSI, along with strong ADX suggesting a strong trend, holding is recommended. Watch for potential consolidation or minor pullbacks.

6-Month Horizon: Buy

• The stock’s recent breakout above the 200-day moving average and strong volume support suggest a bullish outlook in the medium term. Any short-term pullbacks could present buying opportunities.

12-Month Horizon: Buy

• The longer-term trend appears to be reversing to the upside. The crossover of the 50-day and 200-day moving averages is a classic bullish signal for long-term investors.

Key Levels to Watch

• Support Levels: $182.18 (200-day moving average), $176.09 (50-day moving average)
• Resistance Levels: The recent high around $191.90

While the stock is currently overbought in the short term, its breakout above key moving averages and strong volume suggest bullish momentum for the medium to long term.

Looking Ahead

Apple’s strategic move to secure TSMC’s 2-nanometer production capacity is a testament to its relentless pursuit of technological excellence. By enhancing its M-series chips and expanding its AI capabilities, Apple aims to solidify its position as a leader in the tech industry. This collaboration not only benefits Apple but also positions TSMC for significant financial growth. As the tech giant continues to innovate and invest in AI, the future holds promising advancements that will likely reshape the landscape of artificial intelligence and semiconductor technology.