Taiwan Semiconductor Manufacturing Company (TSMC) is expected to see a stock boost following Nvidia’s earnings report. TSMC, a leading chip foundry, manufactures chips for major tech companies, including Nvidia, Apple, and Tesla, without competing with them directly. TSMC handles about 60% of global chip production and 90% of advanced microchip manufacturing. They use a custom 4nm process called 4NP specifically for Nvidia’s Blackwell GPUs, which significantly outperform current GPUs in AI tasks. TSMC’s exclusive capability to mass-produce these complex chips is critical for Nvidia’s success, as Blackwell chips require extensive production capacity. TSMC’s stock has risen over 60% this year due to its strong relationship with Nvidia. Additionally, TSMC uses Nvidia’s AI tools to optimize chip manufacturing, creating a cycle where AI enhances chip production, which in turn improves AI performance.

The Strategic Partnership Between TSMC and NVIDIA

NVIDIA’s reliance on TSMC is a testament to the foundry’s technological prowess. TSMC’s custom 4nm process, known as 4NP, is specifically tailored to manufacture NVIDIA’s advanced GPUs, including the upcoming Blackwell series. These Blackwell GPUs represent a significant leap in AI capabilities, boasting performance metrics that are four times better at AI training and 30 times better at AI inference compared to NVIDIA’s current Hopper GPUs. This extraordinary enhancement in performance per watt is a key factor driving the high demand for NVIDIA’s chips, a demand that TSMC is uniquely positioned to fulfill.

The production of Blackwell GPUs involves complex manufacturing processes, including the integration of two separate dies on a single chip, connected by a high-speed 10 terabyte per second link. This sophisticated design requires substantial production capacity and advanced packaging techniques, making the manufacturing process for Blackwell GPUs significantly more resource-intensive than that of the previous generation. These demands on TSMC’s production capabilities highlight the company’s critical role in NVIDIA’s supply chain, particularly as it pushes the limits of semiconductor manufacturing.

The Future of TSMC and the Impact of NVIDIA’s Innovations

Looking ahead, TSMC’s 3 nanometer (N3) process node is currently in volume production, setting the stage for the next generation of NVIDIA GPUs, known as Rubin. This continued partnership between TSMC and NVIDIA is expected to further drive TSMC’s stock performance, which has already seen a significant increase of over 60% since the beginning of the year. The close relationship between the two companies not only positions TSMC as a key beneficiary of NVIDIA’s success but also underscores the synergistic effects of their collaboration.

One particularly intriguing aspect of this partnership is TSMC’s use of NVIDIA’s AI technology to enhance its chip manufacturing processes. TSMC employs NVIDIA’s AutoDMP tool to optimize chip component placement, achieving speeds up to 30 times faster than previous methods. Additionally, TSMC leverages NVIDIA’s cuLitho library to accelerate computational lithography by 40 to 60 times, a critical advancement that addresses one of the major bottlenecks in modern chip design. These innovations enable TSMC to build better chips more efficiently, creating a virtuous cycle where NVIDIA’s AI technologies enhance TSMC’s manufacturing capabilities, which in turn improve the performance of NVIDIA’s AI-powered products.

Insights

1. TSMC’s exclusive production capability makes it vital to Nvidia’s success.
2. Nvidia’s AI tools are crucial in improving TSMC’s chip manufacturing efficiency.
3. TSMC’s stock is heavily influenced by its relationship with Nvidia.

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: TSMC’s role as a critical partner in Nvidia’s chip production, especially for AI-optimized GPUs, is a key driver of its recent stock performance. The symbiotic relationship, where Nvidia’s AI tools enhance TSMC’s chip manufacturing, highlights TSMC’s indispensable position in the semiconductor industry. Understanding TSMC’s unique capabilities and its close ties to Nvidia is crucial for evaluating its future stock potential.

The Guerilla Stock Trading Action Plan:

• Monitor Nvidia’s earnings and TSMC’s stock performance closely.
• Consider investing in TSMC based on its critical role in the semiconductor supply chain and the expected demand for AI-optimized GPUs.
• Stay informed about advancements in AI and semiconductor technologies, as these will directly impact TSMC’s growth.

Blind Spot: While TSMC’s current dominance is evident, potential future competition or geopolitical risks could disrupt its market position and affect stock performance.

TSM Technical Analysis (daily)

The chart provided is for Taiwan Semiconductor ADR (TSM) on the daily timeframe. The stock price recently experienced a downward movement, indicated by the red candlestick, and is currently trading around $169.75. The price is below the 50-day moving average (blue line at $174.14) but above the 200-day moving average (red line at $139.62). This suggests a short-term bearish trend but a longer-term bullish outlook as it remains above the 200-day moving average.

Volume has been relatively steady, with no significant spikes indicating strong buying or selling pressure.

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 around 51.65, which is neutral, suggesting that the stock is neither overbought nor oversold at the moment.

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) is showing a negative trend, suggesting that volume is flowing out of the stock, which aligns with the recent price decline.

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 showing a reading of 0.722, which is in the upper range but not overbought. This suggests potential for further upside movement but with caution as it nears overbought levels.

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 at 5.49M, indicating accumulation, although it is relatively flat and not showing strong momentum in either direction.

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 Oscillator shows a recent bullish crossover with the MACD line above the signal line, which suggests a potential short-term bullish reversal or continuation of the uptrend.

Support levels can be identified around $160, where the stock found previous support, and around $140, where the 200-day moving average is located. Resistance is near the 50-day moving average at $174.14 and recent highs around $180.

Future trend indications: The chart shows mixed signals with a slightly bearish short-term outlook but potential for a bullish reversal in the near term. The price is below the 50-day moving average, but the bullish MACD crossover and the RSI in the neutral zone suggest that if the stock can hold above $160, it could attempt to break above the $174 resistance. Failure to hold $160 could lead to a retest of the 200-day moving average around $140. The long-term trend remains bullish as long as the stock stays above the 200-day moving average.

Time-Frame Signals:
3 months: Hold (Neutral outlook with potential for upward movement if support holds)
6 months: Buy (Longer-term uptrend intact, especially above the 200-day moving average)
12 months: Buy (Strong long-term support around the 200-day moving average, with potential for growth if the overall market remains favorable)

TSM Technical Analysis (weekly)

The chart provided is for Taiwan Semiconductor ADR (TSM) on the weekly timeframe. The stock has been in a general uptrend since the beginning of 2023, following a recovery from a significant low around $60 in late 2022. The price is currently trading around $169.75, below the recent high of around $200, and has pulled back slightly.

The stock is trading above key moving averages, with the 40-week exponential moving average (EMA) at $150.76, the 150-week EMA at $133.71, and the 200-week EMA at $116.65. The position above these moving averages indicates a strong long-term uptrend, though the recent pullback suggests some short-term caution.

Volume shows a steady increase during the uptrend, with occasional spikes that align with major price movements. The On-Balance Volume (OBV) is trending upwards, indicating that the volume flow is generally positive and supportive of the uptrend.

Support levels can be identified around $160, which aligns with the 40-week EMA, and further down at $140, where the 150-week EMA is situated. The strong support zone is near $116, around the 200-week EMA. Resistance is found near the recent highs at $200, which may be a psychological level and an area of selling pressure.

Future trend indications: The chart suggests a continuation of the long-term uptrend as long as the stock remains above key moving averages. However, the recent pullback could indicate some consolidation or a potential short-term correction before any further advance. If the price holds above the $160 level, the uptrend may continue toward retesting the $200 resistance. A break below $160 could see the stock retesting lower support levels around $140 or even $116.

Time-Frame Signals:
1 year: Buy (The stock is in a long-term uptrend, and holding above $160 could lead to further gains)
2 years: Buy (The uptrend remains intact, with strong support at the 150-week and 200-week EMAs)
3 years: Buy (The stock shows long-term growth potential as long as it remains above the 200-week EMA, indicating sustained bullish sentiment)

Past performance is not an indication of future results. This article 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

As NVIDIA prepares to release its earnings report, the potential for a positive impact on TSMC’s stock is substantial. The strong interdependence between these two tech giants illustrates how advancements in AI and semiconductor technology are driving each other’s growth. TSMC’s strategic importance in the global chip industry, combined with its deep integration with NVIDIA’s product roadmap, positions it to benefit significantly from the ongoing demand for high-performance computing and AI technologies. This week’s developments could very well provide TSMC with the momentum needed to continue its impressive stock performance, reaffirming its role as a linchpin in the semiconductor supply chain.

Frequently Asked Questions (FAQ) – Taiwan Semiconductor and NVIDIA