Which Semiconductor Benefit Most in Coming Generative AI Boom
As we have seen semiconductor sector stocks staging a comeback this week, on Monday (23 Sep) TSMC (TSM) have a +0.4% up after a Wall Street Journal report mentioned that TSMC and Samsung are considering new chip-making facilities in the United Arab Emirates.
$Taiwan Semiconductor (TSM.US)$ continue to gain +4.13% on Tuesday (24 Sep) after news reported that TSM Secures $7.5B Boost for Arizona Expansion, Aims for Advanced Chip Production.
The worthy note would be $NVIDIA (NVDA.US)$ waking up from its slumber after NVDA CEO selling of shares activity should be coming to an end. Another factor that help to push NVDA up was the news that Nvidia prepares to begin shipping its highly anticipated Blackwell GPU during the fourth quarter.
TSM and NVDA was up more than 3% at the end of trading session on 24 Sep 2024.
So in this article I want to look at which semiconductor is going to benefit the most as we see coming generative AI bloom.
Coming Generative AI Boom See Taiwan Benefitting
Generative AI has become one of the leading technologies in the artificial intelligence boom. Generative AI is an algorithm that uses deep learning to generate new content through text, image, audio, music, or video. It accomplishes its task by “analyzing large amounts of data to learn patterns and then use that information to predict what would come next in a sequence.”
In 2023, OpenAI’s ChatGPT, a chatbot that can generate human-like text responses to questions and props, kicked off the proverbial tsunami wave of demand for AI. Thanks to continued development in AI and the components that power it, interest is only compounding each month. As the benefits of AI applications become more apparent, numerous enterprises are setting up strategies to integrate this new technology best.
So if we looked at the chip stocks, we could see that it is not a coincidence that Taiwan semiconductor are benefitting. Meanwhile, artificial intelligence (AI) continues to fuel rapid growth in the component markets that power its applications. As companies compete to build more powerful AI platforms, the need for high-performance computing capabilities and memory solutions is poised to help push the meteoric boom in generative AI.
In the next few years, generative AI is set to explode in value, eclipsing other AI solutions with a tremendous annual growth rate from which Taiwan is poised to benefit the most.
Memory Market Troubles
The semiconductor market continues to shake as turbulence affects the DRAM and NAND flash sectors. Weakened consumer electronics sales, cautious enterprise spending, and lingering excess inventory continue to plague stabilization efforts in obtaining reasonable spot prices. Demand sluggishness persists across the memory sector, and new product lines only contribute to lingering surplus troubles.
So we might want to avoid the stocks that is dealing with DRAM and NAND flash sectors. Artificial intelligence has helped boost memory sales after the dramatic bullwhip from shortage to glut last year. While its aid has supported sales of high-bandwidth memory (HBM) and solid-state drives (SSDs), low demand across consumer electronics has kept complete recovery out of reach.
In a recent report by TrendForce, DRAM spot prices are suffering from downward pressure, especially across DDR4 and DDR5, with the former seeing the most. TrendForce cites an underwhelming peak season as the primary reason for the unfavorable price conditions.
Chips Up by 27% in 2Q24
In a recent report by SEMI, data reveals that the global semiconductor manufacturing industry continues to show signs of improvement. This can be seen in IC sales, as stabilized capital expenditures and installed wafer fab capacity increases have helped push the market toward recovery.
In SEMI’s 2Q 2024 publication of the Semiconductor Manufacturing Monitor (SMM) Report, authored in collaboration with TechInsights, “seasonality and weaker than expected consumer demand impacted electronics sales in the first half of 2024, resulting in a 0.8% decrease year-over-year (YoY).”
SEMI writes, “Starting in 3Q 2024, electronics sales are forecast to see a rebound, growing by 4% YoY and 9% relative to 2Q 2024. IC sales showed robust 27% YoY growth in 2Q 2024 and are expected to surge by 29% in 3Q 2024, surpassing record levels seen in 2021.”
The surge in growth will be driven by AI, as most markets have seen over the last several months. Similarly, installed wafer capacity is projected to rise in 3Q 2024, with foundry and logic-related capacity witnessing more robust growth in Q2. Likewise, memory will continue to grow over the next quarter due to the strong demand for AI chips and the rapid adoption of HBM.
Technical Analysis - Nvidia (NVDA) - MTF
MACD has shown upside movement and NVDA is trading above both short-term and long-term MA.
MTF is showing a strong uptrend signal with Up trend on all time period. I am expecting NVDA to try to move towards the $130 level.
Technical Analysis - Taiwan Semiconductor (TSM) - MTF
We are seeing similar observation on TSM as TSM have been trading above the short-term and long-term MA.
MTF is showing a strong uptrend and MACD is also showing an uptrend movement, I will be monitoring this stock and planned to take a position.
Summary
I believe that the semiconductor sector is recovering with Nvidia coming back from its sleep and there should be more good news coming from this sector.
This should help to power up the chips maker, but we need to be aware of memory chips maker though.
I am holding my position on my NVDA stock as I see potential of it hitting $140 and above.
Appreciate if you could share your thoughts in the comment section whether you think semiconductor sector is recovering.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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73372627 : I like your analysis. One points it is the memory kinds. DDR and NAND still have life to go. AI will be use but in industrial segment those kind of memory will be present for at least onother decay. I supose improvements will be add and also that this period it is an big transition.
Micron as I know work hard to improve those memories chips. For moment embeded systems (allmost use in industrial) required those kind of memory with better speed and channeling.
What we saw in the last time was more of Govs policies and financials tumoultous.
I never see the news about Samsung and TSMC to implant conjoint plant or plants in midle-east. This will surprise me, but we never know.
Manny factors made the semiconductors segment to slowdown. The new 3 nm and 2.5 nm technology come to life in February. TSMC do not buyed yet. Samsung yes one or two. SMC not sure, but was drived for two printers. This it is for me the biggest factor. Second was the failure of DeWave Quantum, which change the equation for the moment and next year.
The Ai will go forward on the way, with better performances. The Industrial segment will adapt to the new reality, and consumer segment will rebound almost because with this new technology more then half will be obsolete.
I test today the new Intel server X14 and I can say it is another world of computing.
ARM it is silence for moment. Is this cause of the TeslaPI phones???? To follow.
Quantum will release soon the new chips.
Micron also.
After storms always calm and progress.
Thanks, nice analysis from your part and to share with us.
nerdbull1669 OP : Thank you for your comment, glad that you like the analysis. I am monitoring the development of the smartphone chips market, as I believe there should be a differentiator coming.
Just my two cents worth of thought.