TSMC: From the depths of Black Monday to the $1 trillion club
Welcome to AI Collision đ„,
In todayâs collision between AI and our world:
A bit of China, a bit of the US, a bit of the Dutch
Nokia: can anyone catch them?
Is government better with AI? (Poll)
If thatâs enough to get the foundry firing, read onâŠ
AI Collision đ„ TSMCâs rise from the â87 ashes
As we explained on Tuesday, there are a lot of vocal dissenters about the longevity of the AI boom that weâre experiencing.
Seems like every major investment bank or research house now has a view that this market is primed for a monumental crash and bursting of the âAI bubbleâ.
Some are saying itâs imminent. Some suggest itâs another two years away. If thatâs the case, do you really want to be out of this market for two years in anticipation of a crash or correction?
Even if you had been an investor in October 1987, youâd still be better off long-term sticking in the market than trying to perfectly time when the market corrects or crashes.
(Yes, THAT October 1987, Black Monday.)
Even from the 2008/09 crash, long term, being out of the market is just not a wise decision â and Iâll tell you about a company today that proves exactly whyâŠ
And even if the market does correct or crash, not only does this provide great chances to pick up cheap stocks, but it also often opens the door for something great to emerge from the depths of investor despair.
In fact, if we wind back to 1987, the same year of âBlack Mondayâ weâll find the origins of whatâs most likely about to become another regular member of the $1 trillion club.
After plying his trade at Sylvania Semiconductor and then a highly successful stint at Texas Instruments (NASDAQ:TXN) Dr. Morris Chang was tapped on the shoulder in 1985 by the Taiwanese government to head up what was to be the Industrial Technology Research Institute (ITRI).
Two years later, whilst still at ITRI, Chang would also start a company involved in semiconductor manufacturing called Taiwan Semiconductor Manufacturing Company.
Thanks to his leadership and expertise in this area, he was promptly backed by the Taiwanese government and also multinational Dutch technology company Philips.
As an investor and early customer, Philips was crucial to TSMC getting off the ground. Also, its business model of making chips, with no interest in designing them, made a lot of sense to Philips and others early on.
TSMC would go on to become the preeminent chip maker for all kinds of tech companies around the world. Today some of its biggest customers include Nvidia, Apple, AMD, MediaTek, Qualcomm and Broadcom.
Itâs also been a publicly listed company for 27 years. Its initial public offering (IPO) in 1997 saw the stock list at $24.78. Stock split adjusted, thatâs an IPO price of a bit over $5. With a stock price today of around $190, thatâs over 3,500% in 27 years â or about 14.5% compounding annually every, single, year.
But whatâs significant about that isnât just the extraordinary returns over that time frame. Itâs the fact that having briefly crossed over the $1 trillion mark just this week, it looks like TSMC is going to leapfrog into the esteemed $1 trillion club and stay there.
TSMC reports earnings next week â and weâll have more in the coming weeks about the big AI and tech players that are reporting soon. As we noted the other day, weâre expecting them to beat expectations.
Now the stock may well run up in anticipation of that â not just cruising through $1 trillion market cap, but smashing past it. It is crucial to the rollout of AI. And as the biggest actual maker of chips needed for AI worldwide, itâs fair to say as important as a company like Nvidia might be, you cannot ignore the company that makes most of its stuff either.
TSMC is an example of regardless of the bump, crises and crashes and corrections in a market, in the long term, quality companies that do really important things can be absolute stars and winners in a portfolio.
AI gone wild đ€Ș itâs tough at the top
I saw this last week. Itâs not the first time Iâve seen it. It probably wonât be the last.
We were all there in 2007, in the midst of Nokia mania. By this stage, I was rocking a Nokia N73.
It wasnât my first Nokia, nor my favourite. That title went to my old bright orange Nokia 5210. I tested out its âruggedâ capabilities by dropping it (intentionally) on a brick and then submerging it in a pint of beer when I first got it.
I also had the Nokia 3210. But then again, who didnât have that one? The 3210 shipped over 160 million units worldwide.
I had some others even as recently as the Nokia 6300 when one Xmas I decided I wanted to go âoff gridâ. I also pined for many more including the N-Gage, the 6810 and N90. But for decades, nothing was better than Nokia.
Note; Iâd love to hear about your favourite Nokia phone, or the Nokia you fell in love with most during their time at the top. Let me know in the commentsâŠ
Even today as far as sitting on the precipice of design, nothing really has ever come close to Nokia.
But I bring all this up today because of that Forbes front page and its relation to AI comes amid all this talk of AI âbubblesâ.
There is no doubt in my mind that AI is with us to stay. It is no bubble if the technology itself will form a fundamental part of all technology into our future.
What might be bubble-like are the key players in the AI space. For now, at least, I donât see the top of the tree changing at all. I donât see how Nvidia and AMD suddenly drop off the perch â not at this point at least.
But we must always appreciate that when you do sit on that throne â as strong and mighty and all-encompassing as it might seem at the time â competition, new technology, someone who just figures out how to do it better can and do regularly come along to disrupt and dominate.
Take nothing for granted. Nokia was the king of its domain for decades. And it did seem like no one could or would catch Nokia. Until they did.
The same could be said for the kings of AI today. Just a reminder, to always keep a look out for what comes next wherever it may come from.
Boomers & Busters đ°
AI and AI-related stocks moving and shaking up the markets this week. (All performance data below over the rolling week).
Boom đ
Veritone (NASDAQ:VERI) up 25%
Tesla (NASDAQ:TSLA) up 14%
AMD (NASDAQ:AMD) up 12%
Bust đ
Brainchip (ASX:BRN) down 8%
WISeKey International (NASDAQ:WKEY) down 8%
UIPath (NASDAQ:PATH) down 8%
From the hive mind đ§
As a parent thereâs enough things you worry about with your kids, let alone the perils of AI. But now youâve got to think about how to teach your kids responsible use of AI, otherwise it might lead to some serious jail time.
Former colleague of mine John Stepek writes a very entertaining column over at Bloomberg. And in his latest one, like weâve done this week, he looks at how to invest in AI in conditions that many consider to be a bubble.
Iâm going to answer the question the BBC poses in this headline succinctly and nice and easy for you⊠YES!
Artificial Polltelligence đłïž The Results
Following on from our last link above in the âHive Mindâ section and following on from the new government that has formed in the UK this week, I want to know your thoughts on dealing with government services and AI.
Weirdest AI image of the day
Forbidden love â r/Weirddallee
ChatGPTâs random quote of the day
âWe must be willing to let go of the life we planned so as to have the life that is waiting for us.â â Joseph Campbell
Thanks for reading, and donât forget to leave comments and questions below,
Sam Volkering
Editor-in-Chief
AI Collision
Yes. I will use AI to take my place in questioning the government services! It will save me days from not having to wait in telephone queues only to be cut off after 30 minutes and going to the back of the queue!
When discussing the election and potential uses of AI by future Government depts, I suddenly thought AI could potentially replace the Chancellor, and produce budgets, based on data and intelligence rather than ideological theories. Would be an interesting 3xperiment if nothing else.
It certainly couldnât get any worse.