00:00So TSMC reporting a 45% rise, 45% rise in monthly sales, in a sign, of course, of sustained
00:06demand for AI hardware amid that market volatility that we saw that was so pronounced in July.
00:12The report comes after TSMC raised its spending projection for the year last month when it faced questions on whether
00:18its AI-related expenditure would deliver meaningful returns.
00:21We're joined now by Bloomberg senior strategist Neil Kampling.
00:24Neil, walk us through the numbers from TSMC.
00:26We are seeing a bit of a lift then for European names on the back of this.
00:29It seems to be read positive by the market so far.
00:32Yeah, so 45% for the monthly sales data.
00:35Analysts are at about 47% for the full quarter when it comes out.
00:38To put that in perspective for a trillion-dollar company, it's a pretty high growth rate.
00:42And it's on track to be the highest top-line number since Q3 2022, so the best in four years.
00:50So that's very supportive of that, helping the chip equipment stocks today in Europe.
00:54And for those chip equipment stocks, let's remember that we have the likes of Applied Materials, ASML's closest comp, really,
01:02reporting results later this week.
01:04And we'll get other AI clues from other earnings in the U.S. this week.
01:08So does TSMC make chips for?
01:10Because this is the critical thing here, isn't it?
01:12TSMC are making the AI chips for NVIDIA.
01:15They're making the chips for AMD.
01:17They also make the chips for the smartphones for Apple.
01:20So they're not the memory trade, which is where there's a lot more volatility around.
01:24These are the core logic, the brains that go into the AI systems and that go into...
01:30Why are we getting less volatility there than we're getting in the memory?
01:34Because memory is more cyclical over the course of longer cycles.
01:37And also in memory, they're all raising their own CapEx forecasts.
01:41And that's actually going to impact in terms of the supply-side dynamics and probably pricing going forward.
01:47Meanwhile, AI tokens have come down about 40% from the highs.
01:52So the actual use of the AI tokens is getting a lot cheaper.
01:55And there's a disconnect between memory pricing and token pricing at the moment.
01:59And I think market participants are betting that the sort of supply going up in memory means that pricing for
02:06memory, DRAM in particular, will come down over time.
02:09Yeah, over time is the question, isn't it?
02:11Over what kind of time frame?
02:14TSMC, the read across in terms of sales from other foundries, the likes of Samsung, do we expect Samsung to
02:20perform similarly well in terms of the sales numbers they're seeing,
02:24particularly when it comes to the GPUs?
02:25We certainly would because Samsung also does not just memory but logic as well.
02:29And it has a leading-edge fab out in the U.S., giving it a good local footprint in the
02:34U.S. market.
02:35So TSMC and Samsung are the two leading logic foundries that should be benefiting substantially from this high demand
02:42and these high-growth kind of estimates that are out in the marketplace.
02:45So it's positive for both.
02:46And definitely, I think, investors prefer that to the memory cyclicality.
02:50OK, so the big question, Randall, is the AI trade back on?
02:54Because it was off for a while and it feels like it's back on again.
02:56Is it back on again?
02:57It was off for a while while you were sort of sunning yourself out of Dunning-Cornwall, Guy.
03:01And I think part of it is we got the accelerating growth coming out from Microsoft, sort of justifying that
03:08CapEx.
03:08We had good accelerating growth coming from AWS, from Amazon.
03:11So there's definitely some comfort from there.
03:14But the big question about when we're going to see these big returns on the invested capital from these host
03:19guys does remain to be seen.
03:21Not all of them can benefit from the AI build-out, but there's certainly some encouraging signs in the meantime.
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