TSMC Reports Slower Chip Sales, Fueling AI Uncertainty

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00:00First of all, is this the first sign that AI demand is plateauing?

00:02I feel like we ask ourselves this every two days and it's plateauing and then it's not.

00:07But could this be really it?

00:09No, I don't think it is, to be honest.

00:11I mean, I think if you put it in context, revenues are up about 17% in local currency,

00:17about 22% in US dollar terms for October.

00:23It's trending in line with the guidance they gave when they gave the Q3 update.

00:28So I think this is where we're expecting it to be.

00:31And it will be, well, it was the single largest revenue month for the year to date.

00:37So, you know, things are still growing.

00:38Things are still very good.

00:39If anything, you know, for TSMC in the next six, 12 months, it's a capacity constraint issue.

00:45You know, we saw that Jensen Huang's been visiting Taiwan, you know, making overtures to TSMC

00:50to make sure that they're still at the top of the pecking order when it comes to the kind of order book.

00:56And so that's the big issue for them next year, I think, is bringing enough incremental capacity

01:01online quick enough to meet the demand outside.

01:04And I don't think they're going to be able to do that.

01:06Matt, we've also heard from the NVIDIA CEO saying, you know, he still sees strong momentum.

01:11How are executives kind of reconciling this optimism with these soft numbers?

01:17Yeah, I mean, look, I wouldn't necessarily characterize them as soft.

01:20I think we're, you know, what we're seeing, and I think what there's no doubt about is that

01:27companies like OpenAI, Microsoft, Google, Meta are spending huge amounts of real money

01:33on real infrastructure.

01:36And the biggest part of that infrastructure spend, or one of the big parts, is the NVIDIA

01:40and other AI accelerator chips that are going into them.

01:44And TSMC is critical to that.

01:46So I think, you know, whilst that CapEx spend from the industry is high, which I think is

01:50going to be through the next 12 months, possibly longer, then I don't think there's any issues

01:56for TSMC here, really.

01:57Beyond that, where companies like OpenAI have to start generating revenue, demonstrate there's

02:02a business model, that's where perhaps the CapEx model starts to change.

02:06And that's where there's a bigger question mark.

02:08But in general, there seems to be like rising competition, right, in this space.

02:12Yeah, that is fair, but I'd say that that kind of affects more the NVIDIA level than necessarily

02:19the TSMC, because all of NVIDIA's competitors, emerging competitors, are also TSMC customers.

02:26And so there's a bit of a, you know, bigger battle, if you like, now for the TSMC capacity.

02:32It's not just NVIDIA that's demanding it, it's others too.