AI boom changes Wall Street: TSMC joins the trillion dollar club

The top 10 most valuable companies in the world are led by Microsoft and Apple, closely followed by AI chip designer Nvidia.

Their global market capitalization on Wall Street exceeds three trillion dollars.

They are followed by Alphabet and Amazon, which recently crossed the two trillion dollar mark, in an ever-changing ranking.

Saudi oil giant Aramco slipped to sixth place, followed by Meta, TSMC and Tesla.

“The semiconductor industry is now the leading sector in the S&P 500,” CFRA analyst Angelo Zino recently noted.

“This has happened in the last 15 or 18 months. It shows how much the world has changed.”

The explosive global demand for chips, fueled by the development of compute-intensive generative artificial intelligence, promises sustained growth for the industry.

Chip manufacturers not only attract investors, but also a lot of government subsidies.

For example, the Biden administration has provided tens of billions of dollars in financial aid over several years to support the construction of chip factories in the United States.

Global sales of semiconductors, which include integrated circuits, microprocessors and memory chips, are expected to reach $611.2 billion in 2024, a record for the industry, according to the Semiconductor Industry Association.

According to the industry association, sales are expected to increase by 16 percent in 2024 and a further 12.5 percent in 2025.

Nvidia, the developer of graphics processing units (GPUs), is at the forefront of this trend and has triumphed on Wall Street in recent months.

Nvidia’s GPUs are a critical component for developing generative AI, and since the launch of ChatGPT in November 2022, their market capitalization has increased eightfold.

In mid-June, the company from Santa Clara, California, was briefly the most valuable listed company in the world with a value of 3.3 trillion US dollars, overtaking Microsoft.

“Nvidia’s GPU chips are the new gold or oil of the technology sector,” said analysts at Wedbush Securities.

In their view, Nvidia, Apple and Microsoft are currently “race for the four trillion dollar market valuation”.

TSMC, with its factories located in Taiwan, has a good chance of also benefiting from the advantages.

While Nvidia, which only designs chips but does not manufacture them, keeps its supply chain secret, it is generally assumed that the majority of its products are manufactured by TSMC.

The Taiwanese giant, which accounts for more than half of global semiconductor demand, reported first-quarter revenue of $18.87 billion earlier this year, up 13 percent year-on-year, while net profit rose 9 percent to $6.97 billion.

Nvidia reported profits of $14.9 billion for the quarter, up sevenfold from the previous year, on revenues of $26 billion.