GP Bullhound's weekly review of the latest news in public markets.
GP Bullhound
GP Bullhound is a software advisory and investment firm supported by 120 employees across 13 offices globally.
In this week's GP Bullhound Newsletter, we discuss TSMC's strong first-quarter performance, new AI semiconductors benefiting TSMC and Broadcom, and AI strategies from Amazon and Google.
Market: This week, the focus was again on US inflation indicators, specifically the CPI. The report suggests that inflation is more persistent than previously thought, delaying potential rate cuts by the Fed. On the tech front, March numbers from Taiwan were mostly stronger than expected, indicating robust AI demand and stabilizing smartphone and PC demand.
Portfolio: We have not made any major changes to the portfolios this week. Several new AI semiconductors for data centers were released by Intel, Google, and Meta. Our analysis suggests that Broadcom, which supplies Google (although the CPU Axion could be from Marvell), and TSMC, supplying all three companies, will be the beneficiaries of these releases.
Software/AI:
Amazon (owned): Highlights from the annual letter from CEO Andy Jassy to shareholders include ongoing cost reductions in retail. AWS has seen less optimization among clients since the end of 2023. Advertising continues to perform well, growing 24% year-over-year to USD 47 billion in 2023. The letter emphasized Amazon's AI strategy, targeting three layers of the stack: building foundation models, leveraging them, and developing applications. The strategy aims to democratize this phase of AI, empowering both internal and external builders to transform customer experiences dramatically. We’re optimistic that much of this transformative AI will be developed on AWS.
Google (owned): Hosted its Cloud Next 2024 event, announcing several new products and collaborations. The event highlighted the deep technical integration of AI layers and introduced a new datacenter CPU, Axion, based on ARM architecture, which offers superior performance and energy efficiency compared to Intel and AMD solutions. The company also moved Gemini 1.5 Pro from limited to public preview and launched a new AI-powered video creation Workspace app called Vids. The event showcased Google's significant investment in AI, suggesting a strong future position despite past issues with older AI tools.
Semiconductors:
TSMC (owned): Reported a 34.3% year-over-year increase in March sales to NT$195.21 billion, with first-quarter growth at 16.5%, totaling NT$592.64 billion—above the consensus forecast of USD 18.1 billion. The strength this quarter is attributed to robust AI demand and sustained PC and smartphone demand, except for a decline in Apple iPhone demand.
Chips Act Subsidies: The long-awaited distribution of Chips Act subsidies is concluding. Last week, Intel received its portion, and this week, TSMC was awarded a subsidy of USD 6.6 billion for its Arizona foundry expansion, plus a USD 5 billion low-cost government loan. TSMC has also increased its investment plans in the region from USD 25 billion to around USD 65 billion by 2030, including the production of 3nm and 2nm chips. The company aims to start mass production of 5nm chips by the first half of 2025. The subsidies will help offset the higher costs of operating in the US, supporting TSMC’s need to meet local semiconductor demands.
Automotive/Semiconductors:
Infineon, NXP (owned): Chinese car sales rebounded in March, growing 6% year-over-year after a weaker February. Sales of EVs and plug-in hybrids increased by 29.5% year-over-year to a total of 709,000 cars. Exports of passenger cars reached a record high, jumping 39% to 406,000 units in March, with exports of new-energy vehicles rising 71% during the month.
Smartphones/Semiconductors:
MediaTek (not owned): Reported March sales of NT$50,480 million, up 17.5% year-over-year, with first-quarter growth at 39.53%. MediaTek is benefiting from improved demand in China and normalized inventories at OEMs, allowing shipments to meet end demand.
For enquiries, please contact: Inge Heydorn, Partner, at [email protected] and Nejla-Selma Salkovic, Associate, at [email protected]
About GP Bullhound: GP Bullhound is a leading technology advisory and investment firm, providing transaction advice and capital to the world’s best entrepreneurs and founders. Founded in 1999 in London and Menlo Park, the firm today has 12 offices spanning Europe, the US and Asia. For more information, visit www.gpbullhound.com
Very insightful