No other company is as synonymous with semiconductors as the appropriately named Taiwan Semiconductor Manufacturing Company (TSM -2.02%), the world's leading semiconductor foundry. TSMC is the pioneer of the foundry model, manufacturing the chips that other companies design on their behalf.
Providing the infrastructure to produce a large fraction of the world's semiconductors has long put TSMC in a lucrative position, and recent artificial intelligence (AI) developments have added to its momentum. That's partly why the stock was up by an impressive 68% so far this year as of Aug. 28.
AI applications like OpenAI's ChatGPT, Alphabet's Gemini, and other generative AI tools have taken the world by storm. Their popularity has sparked an AI gold rush that has companies from virtually every sector scrambling to see how they can use it to enhance their businesses.
AI systems depend heavily on access to vast quantities of data and the computing power to process it quickly and effectively. That power comes from high-performance computing (HPC) chips such as graphics processing units (GPUs) and AI accelerators, and that's where TSMC comes into the picture.
TSMC is one of the few players capable of manufacturing high-end chips for companies like Nvidia -- chips with the processing power necessary for training and running complex AI models. In the second quarter, revenue from HPC chips grew by 28% from Q1, and accounted for 52% of TSMC's $20.8 billion in total revenue -- surpassing 50% for the first time.
TSM Revenue (Quarterly) data by YCharts.
With many tech companies depending on TSMC to churn out their chips, it expects AI-related revenue to be more than 20% of its total revenue by 2028. This trend should work in TSMC's favor for the foreseeable future.
