To The Moon

$Taiwan Semiconductor Manufacturing(TSM)$ is set to hold its Q3 2024 earnings call this Thursday, and the market is optimistic. The primary reason? The robust demand for advanced processes.

Major tech companies like $Apple(AAPL)$ $Qualcomm(QCOM)$ $NVIDIA Corp(NVDA)$ $Advanced Micro Devices(AMD)$ have already booked TSMC's 3nm capacity, with orders extending into 2025. On Monday, TSMC's stock hit an intraday all-time high of $194.25, closing at $192.21.

3nm Capacity Demand to Skyrocket by 2025

The demand for TSMC’s 3nm process is expected to surge in 2025, thanks to the strong demand for smartphone chips, coupled with Nvidia and AMD’s potential increase in AI accelerator orders.

Rumors suggest Apple’s A19 Pro will adopt the N3P process next year, with Qualcomm and MediaTek likely to follow suit for their flagship chips. AMD’s upcoming Instinct MI350 accelerator, based on the CDNA 4 architecture, is also expected to use 3nm technology.

Nvidia may increase its orders at TSMC next year, which will tighten the capacity for both the 3nm and 5nm nodes. Furthermore, as demand for 3nm grows, TSMC's CoWoS packaging capacity is likely to face increased pressure.

Nvidia Stock Hits New High Amid AI Frenzy

Nvidia, a leader in AI, has seen a wave of stock growth in October. On Monday, the company’s stock hit a new all-time high for the first time in nearly four months, reflecting investors' confidence in the high demand for its latest Blackwell architecture chips.

Nvidia briefly touched $139.6 during early trading on Monday, approaching the June 20 record high, with a 3.6% intraday rise. It ended the day up over 2.4%, closing at $238.07, setting a new all-time closing high since June 18.

Nvidia’s stock has risen over 11% since early October, with a year-to-date increase of around 172.2%. On Monday, the stock extended its October gains to over 10%, pushing the year-to-date rise towards 180%. Over the past 12 months, Nvidia's shares have surged nearly 200%.

As of last Friday's close, Nvidia's market cap surpassed $Microsoft(MSFT)$ 's, making it the second-largest U.S. company by market value, only behind Apple. Nvidia's market cap reached around $3.4 trillion by Monday’s close, expanding its lead over Microsoft.

Blackwell Chips Sold Out for the Next 12 Months

Nvidia revealed that its Blackwell chips are already sold out for the next 12 months, signaling strong market demand and promising a high growth trajectory for shipments throughout the year. “All signs point to a strong business outlook and a very bright future,” the company said.

In addition to the bullish outlook for Blackwell chips, TSMC, Nvidia’s key manufacturing partner, also reported strong sales driven by AI demand. Last Wednesday, TSMC’s September revenue surpassed market expectations, growing 39.6% year-on-year to NT$251.87 billion.

For the first nine months of the year, TSMC’s total sales increased 31.9% year-on-year. Analysts noted that “TSMC has been at the forefront of AI development.” HSBC predicts that TSMC's earnings this Thursday will reach the higher end of the company's guidance.

Nvidia Stock Rally Fueled by OpenAI and New Investor Confidence

Nvidia’s stock surge started on October 2, the day OpenAI announced it had completed a massive $6.6 billion funding round, pushing its valuation to $157 billion. Nvidia was among investors, and much of the funding is expected to “flow back” to Nvidia as OpenAI's energy needs continue to grow, requiring more AI chips.

Wall Street analysts have also reinforced their buy ratings on Nvidia. KeyBanc's report predicts that the new Blackwell chips alone will bring Nvidia $7 billion in revenue in Q4, while demand for older chips remains robust. Wedbush analysts noted that a new wave of AI startup funding could further boost Nvidia’s income.

The options market is showing signs of investor optimism about Nvidia’s future. Last Thursday saw a surge in call option buys, with holders securing the right to buy over 30 million Nvidia shares by March next year at prices ranging from $150 to $189—an 11.3% to 40.2% premium over last Friday’s close.