Artificial Intelligence: The Growth Booster for Nvidia and Taiwan Semiconductor

Artificial intelligence (AI) is proving to be a driving force for the growth of numerous tech companies and is expected to remain a significant catalyst in the coming years. According to a study by IDC, AI spending could contribute up to 20 trillion US dollars to the global economy by 2030. While many companies are already benefiting from this technology, Nvidia has the potential to further leverage this development for years to come. Nvidia is a clear market leader with its GPUs, which are highly valued by leading tech companies for their performance in data centers. Nvidia's market share in AI processors is estimated to be an impressive 70% to 95%. Thanks to this leadership, Nvidia has a solid lead in the race for AI chips. The company regularly releases new semiconductors to stay a step ahead of the competition. The latest release is the Blackwell GPU, which, according to CEO Jensen Huang in the recent quarterly conference, is already in use with top customers and is 2.2 times faster compared to the Hopper GPU. Huang anticipates an unprecedented wave of AI spending in data centers heading for his company, which he estimates at two trillion dollars over the next five years. The good news for investors is that Nvidia does not have to wait years for returns. In the third quarter, which ended on October 27, the company's revenue increased by 94% to 35.1 billion dollars, while non-GAAP earnings rose by 118% to 0.81 dollars per share. A significant part of the growth comes from the data center segment, which recorded a revenue increase of 112% to 30.8 billion dollars this quarter. One point to note about Nvidia's stock is the high price. The company's current price-earnings ratio is 54.5, significantly above that of the S&P 500, which is 30.6. Given the increasing investments in AI and Nvidia's leading position in the GPU market, there is likely potential for further increases. On the other hand, Taiwan Semiconductor offers a different perspective on AI investments. The company does not develop innovative software solutions but produces semiconductors for the world's most advanced data centers. It manufactures around 90% of the most advanced processors, and business is booming. In the third quarter, which ended on September 30, Taiwan Semiconductor reported revenues of 23.5 billion dollars, a 36% increase compared to the same quarter last year, while earnings per American Depository Receipt (ADR) rose by 54% to 1.94 dollars.