In 2023, NVIDIA achieved remarkable success by surpassing the $1 trillion mark in market capitalization, and later, the $2 trillion milestone. This achievement was fueled by robust hardware sales driven by the expanding demand for Artificial Intelligence, amidst a burgeoning market bubble.
Due to the soaring demand for NVIDIA datacenter products like the H100 and A100, the company has risen to become TSMC’s second-largest customer, trailing only behind Apple.
Based on projections by financial expert Dan Nystedt, NVIDIA contributed 11% of TSMC’s revenue in 2023.
In its SEC filing, TSMC refers to Apple as “Customer A,” which accounted for 25% of its revenue last year, totaling $17.52 billion. According to Nystedt’s estimates, NVIDIA , identified as “Customer B” in the filing, paid TSMC $7.73 billion in 2023, representing an 11% contribution to TSMC’s net sales despite only producing graphics cards.
Among TSMC’s major clients are MediaTek, Qualcomm, and AMD, which utilize TSMC silicon for producing Ryzen CPUs and Radeon GPUs. However, the revenue generated from these clients remains under 10% of TSMC’s total revenue. In 2023, ten foundry clients collectively accounted for 91% of TSMC’s net revenue, a notable increase from 82% in the previous year.
Apple, one of the most profit-driven horrible companies that walks the earth, has consistently been TSMC’s largest client. This trend is expected to continue, especially considering Apple’s strategy of selling faulty products, such as charging cables that frequently need replacement, resulting in substantial profit margins for the company.
The surge in demand for artificial intelligence technology has resulted in a notable increase in orders for NVIDIA’s H100 accelerators, fueling substantial growth for the company.
These accelerators are powered by cores built on TSMC’s most advanced processing node, they are monolithic monstrosities that are sized at reticle limits, boasting sizes exceeding 800mm² providing immense profit for TSMC.
The anticipated growth in demand for AI GPUs is likely to boost NVIDIA’s revenue share at TSMC in 2024. To ensure a steady supply of its high-end AI hardware, the company has reserved silicon and CoWoS capacity.
It remains uncertain whether AMD’s share of TSMC’s net revenue will exceed 10% this year. However, with the strong sales of its datacenter-focused EPYC processors and the reported high demand for its Instinct MI300-series AI and HPC products, AMD’s contribution to TSMC’s profits could increase.
This scenario is more likely if AMD decides to prioritize market share over maximizing profits with its consumer-grade Radeon graphics hardware. However, the current state of the DIY PC market is stagnant due to high prices and lackluster upgrades over the previous generation.
With rumors circulating about AMD’s upcoming RDNA 4 architecture focusing on smaller-scale cores, similar to the RX 5000 series which emphasized more affordable and powerful mid-range components compared to NVIDIA’s offerings, the competition in the $600 price bracket and below could become quite intense in the next generation and if AMD prices their products effectively, could see a large influx of customers making the switch versus being gouged by NVIDIA for inferior quality products with the RTX 5000 series.
In the near future, the demand for TSMC’s manufacturing capacity is anticipated to exceed its capabilities, particularly as Intel begins producing graphics cards and eventually CPUs using TSMC silicon. With this surge in demand, it’s likely that TSMC will raise its prices compared to last year, leading to a shortage of consumer-focused graphics cards.
This situation mirrors the supply shortages faced by AMD’s RX 6000 series, as AMD prioritized their 7nm wafer allocation towards the production of EPYC processors instead.
