Taiwan Semiconductor Manufacturing Company (TSMC) and Samsung Electronics have emerged as two major players in the increasingly competitive chip manufacturing sector. But TSMC appears to have an edge when it comes to capitalizing on the growing trend in artificial intelligence, according to Mehdi Hosseini, senior technology and hardware equity analyst at Susquehanna. In fact, TSMC shares surged last week after Nvidia impressed investors by predicting a surge in demand for its artificial intelligence-related chips. Nvidia doesn’t make its own chips. Instead, it relies on TSMC for manufacturing. TSM SSNLF, NVDA 1Y Line “When AI becomes a buzzword and more commonly used in everyday conversations, I think TSMC will get the most exposure there,” Hosseini said on May 26. said on CNBC’s “Street Signs Asia” program. TSMC’s focus on semiconductor manufacturing sets it apart from Samsung’s diversified electronics business model, making TSMC less susceptible to global economic fluctuations. “The quality of TSMC’s earnings is improving,” said the analyst, after raising the stock last month after the company’s customers’ inventory levels fell by the end of the year. “Compared to TSMC, which has a lot of influence on the cutting edge of semiconductor manufacturing, Samsung has more exposure to the more volatile memory industry,” Hosseini said. “So, relatively speaking, I think TSMC has better earnings quality and a much better free cash flow margin.” TSMC is better off than TSMC,” Hosseini concluded. Geopolitics It’s not just about who makes the most money, though. Tensions between the U.S. and China have risen, raising concerns about how TSMC’s business in Taiwan, where it is based, will be affected. If tensions escalate, would Samsung in South Korea be safer? Hosseini disagrees. The tech analyst said TSMC is almost the only company when it comes to advanced microchip manufacturing. Tech companies that design chips like Apple, Nvidia, Amazon, Google, and Microsoft rely heavily on his TSMC in manufacturing their chips. These companies have no one else to turn to if something goes wrong in the region, Hosseini said. “Samsung is trying to catch up in foundry, especially in the high-end foundry business, but it still lags far behind TSMC,” Hosseini said. “When geopolitical tensions rise, this is what I think.” [we’ve] There’s an even bigger problem… Nvidia depends on TSMC. And if TSMC is affected by geopolitical disputes, its customers will be more affected than TSMC. ”
