Project Forecast: Significant Increase in AI Chip Income for This Major AI Company Over the Next Three Years (excluding Nvidia)
TSMC, the dominant manufacturer for semiconductor fabrication, is experiencing phenomenal earnings growth, driven by increased demand for more advanced chips. The company's AI-related revenue is projected to more than triple from 2025 through 2027, currently on track to double this year to around $26 billion.
TSMC's leading technology and scale are key advantages that enable it to meet this growing demand. The company, chosen by industry giants like Nvidia, AMD, Broadcom, and Marvell, is set to release its 2nm and 1.6nm processes, with the 2nm arriving later this year and the next generation arriving in late 2026.
The AI-related revenue growth is not limited to TSMC alone. Big tech companies like Microsoft, Google, and Amazon claim their customers can generate better price performance with their own chip designs than Nvidia's GPUs. Companies such as Meta, Microsoft, Alphabet's Google, and Amazon are also developing custom silicon designs to compete with Nvidia's GPUs. AMD, for instance, is developing new chips, MI400, scheduled for 2026, which offer a "rack-scale" system for better price performance.
Nvidia, however, remains a top choice for hyperscalers. Its data center revenue has climbed more than 10-fold due to big tech's purchases of its graphics processing units (GPUs). The company has seen a significant increase in data center revenue over the past three years, driven by demand from big tech companies. Nvidia's expected 50% revenue growth in the second quarter underscores this trend.
Despite this competition, TSMC's strong position and expected growth make it a worthwhile addition to investment portfolios. The company's stock trades for a forward PE ratio of less than 25, making it an attractive value compared to other AI stocks like Nvidia or AMD.
As AI-related revenue continues to climb, it is expected to account for about 30% of TSMC's total revenue by the end of the decade. AMD, too, is receiving commitments from OpenAI, Meta Platforms, Microsoft, and others for its newest series of chips.
In conclusion, the semiconductor market is witnessing intense competition, with TSMC, Nvidia, and AMD leading the charge. As AI continues to permeate various industries, the demand for advanced chips is expected to soar, offering significant growth opportunities for these companies.
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