TSM: Powering NVDA’s Future and the Chip Revolution

$Taiwan Semiconductor Manufacturing(TSM)$ I want to discuss a compelling investment thesis for TSM (Taiwan Semiconductor Manufacturing Company). This isn't about hype; it's about understanding the strategic position TSM holds in the semiconductor industry.

Key to this thesis is the relationship between TSM and one of its largest clients, NVDA $NVIDIA Corp(NVDA)$ . NVDA, a leader in the GPU market, relies almost exclusively on TSM for its chip manufacturing needs. This reliance is crucial because NVDA's business model boasts impressive gross margins, around 90%.

The crux of the investment argument for TSM lies in this dependency. TSM, as a leading foundry, has not yet fully leveraged its pricing power. Given the increasing demand for advanced chips and the limited number of players capable of manufacturing them at the cutting-edge level that companies like NVDA require, TSM is in a prime position to renegotiate pricing.

As TSM realizes its strategic advantage and adjusts its pricing model to reflect the value it provides, we can anticipate a significant impact on its revenues and margins. This scenario is not far-fetched considering the growing demand for semiconductors and the substantial investments TSM is making in advanced manufacturing technologies.

In conclusion, going long on TSM is a bet on the company's ability to capitalize on its pivotal role in the semiconductor supply chain. It's a play on the increasing value of chip manufacturing in a tech-driven world and TSM's unique position within that realm.

Yes, there is geopolitical risk but a war would also mean no chips for iPhones, NVDA and pretty much all advanced electronics. They have a plant planned in America but from whatever I can research, this is running a decade late.